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Taxation (UK) · Gains and losses on the disposal of movable and immovable property

Business Asset Disposal Relief and Investors' Relief for ACCA TX-UK

Updated 11 October 2026 · Fact-checked

Business asset disposal relief (BADR) and investors' relief (IR) tax qualifying gains at 14% instead of 18% or 24%. Each has a £1,000,000 lifetime limit. BADR suits working owners and employees of trading businesses. IR suits outside investors in unlisted trading companies. Gains above the limit are taxed at normal rates.

Understand Business Asset Disposal Relief and Investors' Relief

Capital gains tax (CGT) normally applies at 18% or 24%. These two reliefs cut the rate to 14% on qualifying gains. The aim is to reward people who run a business or put money into one.

Business asset disposal relief (BADR) is for people who are actively involved in a business. It applies in two main cases:

  • The disposal of all or part of a trading business. You must have owned the business for at least 2 years before the disposal. If the business has ceased, the disposal of its assets must be within 3 years of cessation, and the 2 years are counted back from cessation.
  • The disposal of shares in your personal company. You must be an officer or employee of the company and hold at least 5% of its ordinary share capital and at least 5% of its voting rights. The company must be a trading company, or the holding company of a trading group. All of this must be true throughout the 2 years before the disposal (or before cessation, if the company has ceased trading and you dispose within 3 years).

These conditions are not in the ACCA rates table. Learn them, because the exam tests them.

Investors' relief (IR) is for outsiders. The investor must not be an employee or officer of the company. The shares must be newly issued ordinary shares in an unlisted trading company, subscribed for in cash. The investor must hold them for at least 3 years from the date of issue.

The key numbers are in the tax rates and allowances ACCA gives you in the exam. The rate is 14% for both reliefs. The lifetime limit is £1,000,000 for BADR and a separate £1,000,000 for IR. Gains within the limit are taxed at 14%. Any excess is taxed at 18% or 24% as normal.

The relief works as a special rate, not an exemption. The annual exempt amount of £3,000 is still available, and you choose how to use it. Because the relief rate is lowest, it is usually best to set the annual exempt amount and losses against gains that would otherwise be taxed at the higher rates.

Key rules to remember

BADR/IR rate
Qualifying gain within lifetime limit × 14%
Same rate for both reliefs. Given in the exam rates table.
Lifetime limits
BADR £1,000,000; IR £1,000,000
Separate limits. Cumulative over the person's lifetime, so deduct earlier claims.
Gain above the limit
Excess taxed at 18% or 24%
The excess is taxed with the other non-relief gains. Use 18% to the extent basic rate band is still unused, then 24%.
Annual exempt amount
£3,000
Set against gains taxed at the highest rate first to save the most tax.
Basic rate band
£37,700
Gains qualifying for BADR/IR are taxed first, so they use the basic rate band first. Other gains then fall into whatever band is left after taxable income and the relief gains: 18% within it, 24% above it.

How to solve Business Asset Disposal Relief and Investors' Relief questions

Use this order for any BADR or IR question. It keeps your tax calculation tidy and picks up the marks for the rate split.

  1. 1Decide which relief could apply. Owner of a trading business, or officer or employee with at least 5% of a trading company: BADR. Outside investor in newly issued unlisted company shares: IR.
  2. 2Check the conditions against the facts: trading business or company, personal company tests (officer or employee, 5% of shares and votes), and the period of ownership (2 years for BADR, 3 years from issue for IR). If a condition fails, there is no relief.
  3. 3Compute each chargeable gain in the normal way: proceeds less cost, less enhancement expenditure, less costs of disposal.
  4. 4Offset current-year losses and then the annual exempt amount. Set these against gains that do not qualify for relief, or against those taxed at the highest rate.
  5. 5Check the remaining lifetime limit. Deduct any earlier BADR or IR gains the person has already claimed. Only the unused limit gets 14%.
  6. 6Tax the qualifying gain within the limit at 14%. Any excess is added to other non-relief gains.
  7. 7Gains qualifying for relief are taxed first and use the basic rate band first. For non-relief gains, use any basic rate band left after taxable income and the relief gains: 18% within it, 24% above it. Add the tax together and show each rate separately.
  8. 8Quote the date CGT is due if asked, and state your conclusion clearly.

Quickest way: Rate split in three lines

When to use it: Section A and Section B objective questions that ask for the CGT liability, where there is one qualifying gain and little else.

  1. Qualifying gain within limit: multiply by 14%.
  2. Subtract the annual exempt amount from non-qualifying gains first, if there are any.
  3. Tax the rest at 18% or 24% depending on unused basic rate band, then add the totals.

Common mistakes in Business Asset Disposal Relief and Investors' Relief

  • Using 10% or another old rate for the relief.

    Older notes and websites quote different rates from earlier years.

    Fix: Use the 14% rate shown in the exam's tax rates table for this sitting.

  • Treating the £1,000,000 limit as annual.

    Students confuse it with the annual exempt amount.

    Fix: It is a lifetime limit. Always check for earlier claims and deduct them first.

  • Combining BADR and IR into one £2,000,000 limit for a single gain.

    Both limits are £1,000,000, so students add them.

    Fix: Each relief has its own limit. Apply each only to gains that qualify under that relief.

  • Applying the annual exempt amount to the relief gain before higher-rate gains.

    Students follow the order in which the gains are listed.

    Fix: Use the exempt amount against gains taxed at 24% first, then 18%, then 14%, for the lowest total tax.

  • Giving BADR to an investor who is not an employee or officer.

    The two reliefs sound alike.

    Fix: Ask whether the person works in the business. If not, check IR instead, which needs newly subscribed shares.

  • Ignoring the basic rate band for the excess over the limit.

    Students treat the excess as automatically 24%.

    Fix: Gains qualifying for relief are taxed first at 14% and use the basic rate band first. Work out the band left after taxable income and those gains. Tax the excess and other gains at 18% within it and 24% above it.

Worked examples

Example 1

Ravi sold his unincorporated trading business and made a chargeable gain of £180,000 that qualifies for business asset disposal relief. He has made no earlier claims. His other gains for the year are nil. Calculate his CGT liability. Use the annual exempt amount.

Show the solution
  1. Gain qualifying for BADR: £180,000.
  2. Annual exempt amount: £3,000. Set it against the qualifying gain as there is no other gain: £180,000 − £3,000 = £177,000.
  3. Lifetime limit remaining: £1,000,000, so all of the gain is within it.
  4. CGT: £177,000 × 14% = £24,780.

Answer: CGT payable is £24,780.

Example 2

Meera, a higher rate taxpayer, sold shares in her personal trading company and made a gain of £400,000 that qualifies for BADR. She has been an officer of the company and held 30% of its shares and votes for six years. She has already claimed BADR on gains of £700,000 in an earlier year. She also made a gain of £20,000 on a non-qualifying asset. Calculate her CGT liability. Assume her annual exempt amount has already been used against other gains.

Show the solution
  1. Remaining BADR limit: £1,000,000 − £700,000 = £300,000.
  2. Qualifying gain within the limit: £300,000 × 14% = £42,000.
  3. Excess qualifying gain: £400,000 − £300,000 = £100,000. It is taxed as a normal gain.
  4. As a higher rate taxpayer, Meera has no basic rate band left, so all non-relief gains are taxed at 24%.
  5. Non-relief gains total: £100,000 + £20,000 = £120,000. At 24% = £28,800.
  6. Total CGT: £42,000 + £28,800 = £70,800.

Answer: CGT payable is £70,800.

Exam tips

  • The rates, lifetime limits and annual exempt amount are provided in the exam, so spend revision time on the conditions and the order of calculation.
  • Read the scenario for who the person is: employee or officer points to BADR, outside investor points to IR.
  • In Section C show each rate on its own line so that follow-through marks are available.
  • In objective questions, check the remaining lifetime limit before multiplying by 14%.
  • Give the answer to the nearest £, as the supplementary instructions require.

Practice questions from Gains and losses on the disposal of movable and immovable property

Business Asset Disposal Relief and Investors' Relief in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Business Asset Disposal Relief and Investors' Relief: frequently asked questions

What is the difference between BADR and investors' relief?

BADR is for people involved in running a business, such as owners, partners, officers and employees. Investors' relief is for outside investors in newly issued shares in an unlisted trading company. Both give a 14% rate and have a £1,000,000 lifetime limit.

What is the lifetime limit for BADR in TX-UK?

The limit is £1,000,000 for BADR, and a separate £1,000,000 for investors' relief. It applies across your lifetime, so earlier claims reduce what is left. Gains above the unused limit are taxed at normal CGT rates.

What CGT rate applies under BADR and IR for TX-UK?

The rate is 14% on qualifying gains within the lifetime limit. This is shown in the tax rates table you receive in the exam. Excess gains are taxed at 18% or 24%.

Do I still get the annual exempt amount if I claim BADR?

Yes. The £3,000 annual exempt amount is still available. For the lowest tax, set it against gains taxed at the highest rate first.