What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR), offers a reduced Capital Gains Tax (CGT) rate on the disposal of qualifying business assets. Instead of the higher CGT rate of 24%, qualifying disposals are taxed at 14% up to a lifetime limit of £1m of qualifying capital gains. This rate rises to 18% from 6 April 2026.
This relief has traditionally been available to individuals disposing of assets used in their trading businesses.
Where business assets are disposed of, BADR is available if the business has ceased and the disposal occurs within three years of cessation. Additionally, the asset must have been owned for at least two years immediately before cessation.
BADR is claimed through the Capital Gains section of a Self-Assessment tax return for the tax year in which the disposal occurred.
How does BADR apply to landlords?
BADR has been available to landlords when disposing of a property that meets the criteria of a Furnished Holiday Let (FHL).
Landlords operating properties under the FHL regime have been able to benefit from BADR due to the unique “trading” status given to holiday lets. This distinction placed FHLs in a more favourable category compared to standard residential lets, allowing property owners to access a range of business-related tax reliefs.
However, as of 6 April 2025, FHLs are no longer treated as a separate category of rental business.
How does the abolition of the FHL treatment of properties link to BADR?
Now that the FHL regime has been abolished, the taxation of FHLs will align with that of other residential lettings, resulting in the loss of several tax advantages previously exclusive to FHLs.
Landlords selling former FHL properties will now find themselves subject to the standard residential CGT rules. This will represent a significant rise in tax liability, particularly for those who were hoping to exit the holiday let market or restructure their property portfolio with tax efficiency in mind.
Can You Still Claim BADR After April 2025?
The good news is that landlords may still qualify for BADR, but only under specific conditions.
If an FHL business ceased trading before 6 April 2025, BADR may still be available provided the disposal occurs within three years of the business ceasing. This transitional rule could provide crucial relief for landlords who had intended to sell but were not able to complete the transaction before the cut-off.
For further information on general CGT queries, please see our Capital Gains Tax page.
