Business Asset Disposal Relief (formerly Entrepreneurs Relief) changed in April 2025. The CGT rate on qualifying disposals increased from 10% to 18%. On a £3m exit, that is a difference of £240,000 in tax. On a £5m exit, it is £400,000.
The rate is still lower than the standard CGT rate of 24% on residential property and 20% on other assets. But the gap between BADR and a fully structured exit has widened. The founders who prepared in advance are paying less. The ones who did not are paying more.
What BADR still gives you
BADR applies to the first £1m of qualifying gains on a business disposal. The rate is now 18%. On a £1m gain, the tax is £180,000 instead of the £100,000 it would have been before April 2025. The lifetime limit remains £1m, it was not reduced in the 2025 changes.
For exits above £1m, gains above the £1m threshold are taxed at the standard CGT rate of 24% (for higher rate taxpayers). BADR does not apply to the excess.
Why the Substantial Shareholding Exemption matters more now
The Substantial Shareholding Exemption (SSE) provides a complete exemption from CGT on the disposal of a trading subsidiary held by a corporate holding company. It is not capped at £1m. It applies to the full gain. And the rate is 0%, not 18%.
The qualifying conditions are specific: the selling company must have held at least 10% of the ordinary shares in the trading company for a continuous period of 12 months in the six years before disposal. The trading company must be a qualifying trading company throughout that period.
For a founder who has held their business inside a group structure for more than 12 months, SSE is the mechanism that makes the BADR rate change largely irrelevant. The gain does not arise at the individual level at all.
The timing problem
SSE requires the holding company to have been in place and holding the shares for at least 12 months before the disposal. You cannot install the structure the week before you sign heads of terms. The founders who are paying 18% BADR on their exits this year are the ones who did not install the holding company two years ago.
The founders who are paying 0% are the ones who did.
What to do now
If you are planning an exit in the next two to five years, the question is not what the BADR rate is today. The question is whether your current structure qualifies for SSE at the point of disposal. If it does not, the cost of restructuring now is a fraction of the tax saving at exit.
The Capital Audit identifies your current exit tax exposure and the specific structural changes required to reduce it.
What the Rate Change Means for Architecture
The BADR rate change is a Stability-layer event. It changes the cost of an unplanned exit. It does not change the cost of a planned one.
The Growth layer (a holding company with SSE eligibility) means the BADR rate is irrelevant for qualifying disposals. The Substantial Shareholding Exemption eliminates CGT entirely. SSE eligibility is determined by the holding structure, not by the trading company.
The Expansion layer is the constitutional architecture that ensures SSE eligibility is maintained, that the holding company was properly constituted and has held the shares for the qualifying period, and that the exit is structured to maximise the exemption rather than rely on a relief that Parliament has already started to erode.