The Real Cost of Delaying Property Sales: How the BADR Rate Rise to 14 Percent from April 2025 Is Impacting Landlords and Developers
The Impact of Missing the Deadline
In the world of tax planning, timing is everything. For business owners, landlords, and developers, April 6th 2025 marked the end of a valuable window. From that date, the Business Asset Disposal Relief (BADR) rate increased from 10 percent to 14 percent, with a further rise to 18 percent already confirmed for April 2026.
This change significantly increases the tax burden for those selling qualifying business assets, particularly where gains are substantial. The difference between selling before and after April 2025 is not just academic; for many, it now represents thousands or even tens of thousands of pounds in additional tax.
If you are now planning a business sale, property disposal, or incorporation, it is essential to understand how this new rate affects your tax position and what options may still be available to mitigate the impact.
What is Business Asset Disposal Relief (BADR)?
Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) is a capital gains tax relief available to individuals disposing of qualifying business assets. When conditions are met, a lower rate of CGT is applied to gains up to the individual’s £1 million lifetime limit.
Qualifying disposals can include:
- Shares in a trading company where the individual holds at least 5 percent and is an officer or employee
- Business assets used in a trade, such as commercial property used in a sole trade or partnership
- Certain furnished holiday lettings (when run as a business)
- Assets disposed of during the winding up of a business
Until 5 April 2025, the BADR rate was 10 percent. From 6 April 2025, that rate rose to 14 percent and will increase again to 18 percent from 6 April 2026.
Who Is Affected by the Rate Increase?
The rise to 14 percent applies to all qualifying BADR disposals completed from 6 April 2025 onward. This primarily affects:
- Landlords disposing of furnished holiday lets that qualify for BADR
- Sole traders and partnerships winding up their businesses
- Business owners selling shares in a qualifying trading company
- Property developers and traders planning exit strategies
- Individuals incorporating a property business who may have qualified for BADR as part of the restructuring
If you delayed a qualifying disposal beyond the 5 April 2025 deadline, your tax bill has already increased by 40 percent on gains eligible for BADR.
How Much More Tax Will You Now Pay?
To understand the financial impact of the change, let us take a simple example.
Scenario:
A landlord or property developer makes a qualifying gain of £500,000 on a disposal that meets the conditions for BADR.
Before 6 April 2025 (10 percent rate):
Tax payable: £50,000
After 6 April 2025 (14 percent rate):
Tax payable: £70,000
Increase in tax: £20,000
This cost rises even further if the disposal is delayed past 6 April 2026, when the BADR rate is set to increase to 18 percent.
From 6 April 2026:
Tax payable: £90,000
Total increase from April 2025: £40,000
This assumes the full gain qualifies and the individual has not used their £1 million lifetime allowance. Where that allowance has already been used, the standard CGT rate (currently 20 percent for higher rate taxpayers on most assets) may apply.
Are There Still Opportunities for Tax Planning?
Although the most favourable 10 percent rate is no longer available, there are still steps you can take to improve your tax position before the rate increases again in April 2026.
These include:
- Reviewing whether your business or disposal will still qualify for BADR at 14 percent
- Structuring sales in advance to ensure eligibility and maximise the use of the remaining lifetime limit
- Considering other CGT reliefs and exemptions such as rollover relief, incorporation relief or gift relief where appropriate
- Evaluating the timing of disposals between now and 5 April 2026 to avoid the 18 percent rate
For clients with gains exceeding £1 million or with more complex business disposals, these planning strategies are even more valuable.
Common Misconceptions About BADR
There are several misunderstandings that often arise when individuals consider BADR. These include:
- Assuming residential buy-to-let properties qualify
They usually do not. BADR applies to trading businesses, and investment activity such as buy-to-let is generally excluded. - Believing you automatically qualify if you sell shares in a company
To qualify, you must be an employee or officer of the company and own at least 5 percent of shares and voting rights for two years prior to the sale. - Thinking timing does not matter
Timing is critical. If a disposal completed even one day late, the 14 percent rate now applies. - Assuming partial disposals always qualify
The disposal of assets must form part of the sale or cessation of the business in many cases. Isolated asset sales may not meet the qualifying criteria.
What About Incorporating a Property Business?
For landlords and developers considering incorporation, BADR may still be relevant, but the situation is increasingly complex.
Some incorporation strategies involve disposing of a qualifying property business to a newly formed company in exchange for shares. If structured correctly, this can result in CGT relief either under BADR (subject to conditions) or via incorporation relief under section 162 of the Taxation of Chargeable Gains Act 1992.
However, incorporation planning must be approached carefully, especially as HMRC has increased its scrutiny in this area. If you are planning to incorporate before April 2026, now is the time to review your position.
Key Facts About the BADR Rate Rise in 2025
Business Asset Disposal Relief (BADR) offers reduced capital gains tax rates for individuals disposing of qualifying business assets, including shares and trading properties. As of 6 April 2025, the BADR rate increased from 10 percent to 14 percent. This applies to gains up to a £1 million lifetime limit. A further increase to 18 percent is scheduled for 6 April 2026. Those who delayed qualifying disposals past April 2025 now face a higher tax liability. Planning is essential for anyone looking to exit a business, sell qualifying assets, or incorporate property interests before the next rate increase.
How Merranti Accounting Can Help
If you are planning a business disposal, property sale, incorporation or share restructuring, now is the time to act.
The end of the 10 percent BADR rate is already impacting our clients, and the upcoming rise to 18 percent in April 2026 makes it even more important to plan ahead.
Merranti Accounting offers:
- Expert guidance on CGT and BADR qualification
- Strategic planning for timing your disposal or incorporation
- Assistance with business valuations and structuring
- Comprehensive support for property developers and company shareholders
To arrange a review of your position or to speak with a senior tax advisor, get in touch today.
Call: 01342 836 557
Email: contactus@merranti.com
