Advanced Taxation (UK) · Capital gains tax: gains and losses on the disposal of movable and immovable property

Business Asset Disposal Relief and Investors' Relief for ACCA ATX

Updated 11 October 2026 · Fact-checked

Business asset disposal relief (BADR) and investors' relief cut CGT on qualifying gains to 14%, up to a £1,000,000 lifetime limit for each relief. Check the conditions first: a qualifying business disposal held for two years, or newly subscribed unlisted shares held three years. Then apply the limit and tax any excess at 18% or 24%.

Understand Business Asset Disposal Relief and Investors' Relief

Normally, an individual's chargeable gains are taxed at 18% or 24%, depending on how much of the basic rate band is left. Business asset disposal relief (BADR) and investors' relief replace those rates with a flat 14% on qualifying gains. The tax tables give the rate as 14% and the lifetime limit as £1,000,000 for each relief.

BADR is aimed at people who built and ran a business. It applies to three types of disposal: all or part of a trading business you run alone or in partnership; shares or securities in your personal company, which must be a trading company or the holding company of a trading group; and an associated disposal of a personally owned asset used in the business. The business or company must be a trading one, and you must meet the conditions for at least two years up to the disposal (or up to cessation, if the disposal follows within three years of it).

For shares, your personal company is one where you hold at least 5% of the ordinary share capital and at least 5% of the voting rights. You must also be entitled to at least 5% of the distributable profits and of the assets on a winding up (or of the sale proceeds on a sale of the company). You must also be an officer or employee of the company throughout the two years.

An associated disposal is a sale of an asset you own personally, such as a building used by your company or partnership. It qualifies only if it is made as part of your withdrawal from the business, through a material disposal of your shares or partnership interest. The asset must also have been used in the business for the two years before. Relief can be restricted if you charged rent or the asset was only partly used in the business.

Investors' relief is for outside investors, not business owners. It applies to newly issued ordinary shares that you subscribed for in cash in an unlisted trading company (or the holding company of a trading group). You must hold them for at least three years, and you must not be an employee or paid officer of the company. The rate is the same 14%, with its own separate £1,000,000 lifetime limit. Gains above a limit are taxed at the normal 18% or 24%.

Key rules to remember

BADR rate and lifetime limit: Qualifying gain taxed at 14%, up to £1,000,000 of lifetime gains; Both figures come from the tax tables. Gains above the remaining limit fall back to 18% or 24%.
Investors' relief rate and limit: Qualifying gain taxed at 14%, up to a separate £1,000,000 lifetime limit; This limit is separate from the BADR limit. Using one does not use up the other.
Remaining lifetime limit: Remaining limit = £1,000,000 − qualifying gains on which relief was claimed before; The limit is cumulative across all disposals, not per tax year.
BADR holding period: Two years up to the disposal date (or up to the cessation date if the disposal is within three years of cessation); Applies to the business, or to the personal company conditions, whichever is being sold.
Personal company test: At least 5% of ordinary share capital and 5% of voting rights, plus officer or employee status; You must also be entitled to at least 5% of profits and 5% of assets or sale proceeds.
Investors' relief holding period: New unlisted shares, subscribed for in cash, held three years from issue; You must not be an employee or paid officer of the company.
Using the annual exempt amount: Annual exempt amount £3,000, set against gains taxed at the highest rate first; This saves the most tax. Set it against 24% gains before 18% gains, and 18% gains before 14% gains.
BADR gains and the basic rate band: BADR gains use the basic rate band before other gains; This can push other gains in the same year into the 24% rate.

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

Use this method for any BADR or investors' relief question. Work through eligibility before you calculate anything.

1Identify what is being sold: a business, shares in a personal company, an associated asset, or newly subscribed unlisted shares.
2Test the conditions: trading status, the two-year period, the 5% holding and officer or employee status for BADR, or three-year holding and no employee status for investors' relief.
3For an associated disposal, check it is part of a withdrawal from the business and check for rent or part use that restricts the relief.
4Compute each gain before relief, deduct current-year losses, and decide which gains qualify.
5Find the remaining lifetime limit, and split qualifying gains into the part within the limit and the excess.
6Deduct the annual exempt amount from the gain taxed at the highest rate, then apply 14%, 18% or 24% to each part, using the basic rate band correctly.
7Add up the CGT and state it clearly, along with any assumptions about conditions that the scenario does not confirm.

Quickest way: Four-line BADR check

When to use it: Use this in Section A when you must quickly decide whether relief is available and what it saves.

Write the three tests: trading, two years, and 5% plus officer or employee (or the associated disposal test).
Write the remaining limit: £1,000,000 minus earlier claims.
Tax the qualifying gain within the limit at 14%, and the rest at 24% (or 18% if basic rate band remains).
Set the £3,000 annual exempt amount against the highest-rate gain, then state the saving compared with the normal rate.

Common mistakes in Business Asset Disposal Relief and Investors' Relief

Applying BADR without checking the two-year period or the 5% personal company test.
Students see 'sale of a business' and jump straight to 14%.
Fix: Tick off every condition in writing before you calculate. If a fact is missing, say what you assume.
Treating the £1,000,000 limit as annual.
Most other CGT figures, such as the annual exempt amount, reset each tax year.
Fix: Remember the limit is for a lifetime. Always deduct earlier qualifying gains first.
Using the BADR limit and investors' relief limit as one combined limit.
Both are £1,000,000 and both give 14%.
Fix: Treat them as two separate limits. Each is used only by its own relief.
Giving relief on an associated disposal that is not part of withdrawal from the business.
Students focus on the asset being used in the business and forget the link to a material disposal.
Fix: Check that the owner is also disposing of shares or a partnership interest as part of the withdrawal, and that any rent charged is considered.
Setting the annual exempt amount against the 14% gain when other gains are taxed at 24%.
Students apply it in the order the gains are listed.
Fix: Set it against the highest-rate gain first, because that saves the most tax.
Forgetting that BADR gains use up the basic rate band first.
Students tax other gains using the remaining band as if BADR were not claimed.
Fix: Place BADR gains in the basic rate band before other gains, then tax the other gains at the rate that remains.

Worked examples

Example 1

Anita sells her unincorporated trading business in 2025/26. The gain of £500,000 qualifies for business asset disposal relief. She claimed relief on earlier gains of £700,000. She has no other gains or losses, and her taxable income is £60,000. Calculate her CGT liability for 2025/26.

Show the solution

Remaining lifetime limit = £1,000,000 − £700,000 = £300,000.
Gain within the limit = £300,000, taxed at 14%: £300,000 × 14% = £42,000.
Excess gain = £500,000 − £300,000 = £200,000. This does not qualify for relief.
Her taxable income of £60,000 exceeds the £37,700 basic rate band, so the excess is taxed at 24%.
Set the £3,000 annual exempt amount against the excess, which is taxed at the higher rate: £200,000 − £3,000 = £197,000.
CGT on the excess = £197,000 × 24% = £47,280.
Total CGT = £42,000 + £47,280 = £89,280.

Answer: Anita's CGT liability for 2025/26 is £89,280.

Example 2

Ben owns 30% of the ordinary shares and votes of Bee Ltd, an unlisted trading company. He has been a director for six years and is entitled to 30% of its profits and assets. He sells all his shares for a gain of £800,000. At the same time he sells a warehouse he owns personally for a gain of £120,000. Bee Ltd has used the warehouse rent-free for five years. Ben has made no earlier BADR claims. Calculate his CGT for 2025/26.

Show the solution

Shares: Ben holds more than 5% of shares, votes, profits and assets, and he has been a director for more than two years. This is a qualifying disposal of shares in a personal company.
Warehouse: it was used in Bee Ltd's trade for more than two years and is sold as part of Ben's withdrawal from the company. As no rent was charged, there is no restriction. This is a qualifying associated disposal.
Total qualifying gains = £800,000 + £120,000 = £920,000.
This is within the £1,000,000 lifetime limit, so all of it is taxed at 14%.
Deduct the annual exempt amount: £920,000 − £3,000 = £917,000.
CGT = £917,000 × 14% = £128,380.

Answer: Ben's CGT liability for 2025/26 is £128,380. If he had sold only the warehouse and kept his shares, it would not be an associated disposal and BADR would not apply to it.

Exam tips

Write each condition as a short numbered list and tick it against the scenario facts. Markers award marks for the test, not just the answer.
Quote 14% and the £1,000,000 limit from the tax tables, but follow any different instruction given in the question.
Look for dates in the scenario. The two-year and three-year periods are often the trap, such as a business that ceased more than three years before the sale.
Show the split between the part within the limit and the excess, even if you are unsure of other figures, so you earn method marks.
Where the question asks you to advise, compare the tax with and without relief, and note any timing action that could secure the conditions.

Practice questions from Capital gains tax: 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.

ACCA Applied SkillsBusiness Asset Disposal Relief and Investors' Relief

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

What is the difference between business asset disposal relief and investors' relief?

BADR is for owners and workers in a business who sell a trading business, shares in a personal company, or an associated asset. Investors' relief is for outside investors who subscribed for new unlisted shares and are not employees or paid officers. Both give a 14% rate and each has its own £1,000,000 lifetime limit.

What is the BADR rate and lifetime limit in the ATX-UK exam?

The tax tables give a rate of 14% and a lifetime limit of £1,000,000, for both BADR and investors' relief. You should assume the 2025/26 rates continue unless the question tells you otherwise.

What is an associated disposal for BADR?

It is a disposal of an asset you own personally and which is used in your business or personal company, such as a building. It qualifies only if you make it as part of withdrawing from the business through a material disposal of your shares or partnership interest. Relief can be restricted if you charged rent or the asset was used only partly in the business.

Does the annual exempt amount reduce the gain before or after BADR?

You deduct the £3,000 annual exempt amount from the gains, and it is best set against the gain taxed at the highest rate. If all your gains are BADR gains, it simply reduces the gain taxed at 14%.