Closing a company is often a positive step. A clean retirement plan. A restructure that finally simplifies things. Or a decision to move on without loose ends.
If you are hoping BADR will reduce the Capital Gains Tax you pay, it is worth slowing down and checking the detail. BADR can be valuable, but it is also easy to trip over small rules, especially when you are closing a company rather than selling it in the usual way.
What Is BADR?
Business Asset Disposal Relief (BADR) is a tax relief that can reduce the rate of Capital Gains Tax (CGT) you pay when you dispose of certain business assets, including shares in your company.
A few simple points help most people make sense of it:
- BADR is claimed by you as an individual, not by the company.
- It only applies to qualifying gains, and only up to your lifetime limit.
- It does not automatically apply just because you are a director or shareholder. Eligibility matters.
BADR used to be commonly referred to as Entrepreneurs’ Relief. You will still see that name in older guides and searches, but it is the same relief.
How BADR Rates Have Changed
Historically, many people remember BADR as the “10% rate”. That is no longer the current position.
For qualifying disposals:
- 6 April 2025 to 5 April 2026: the BADR rate is 14%.
- From 6 April 2026: the BADR rate increases to 18%.
This is why timing can matter. If you are close to making a disposal, the date it is treated as happening for tax purposes can affect the rate applied.
BADR also has a lifetime limit of £1 million of qualifying gains. Once you have used it, gains above that limit are taxed at the normal CGT rates for that period.
When BADR Might Apply When You Are Closing a Company
People often assume BADR only applies on a sale to a third party. In reality, it can be relevant in a few “closing down” situations, including:
- Disposing of shares as part of a restructure or management buyout.
- Receiving distributions as part of a solvent liquidation (where the distribution is treated as capital rather than income).
- Selling business assets as part of winding down, where the disposal meets the relief conditions.
The key is this: the closure route you choose can affect how money leaving the company is taxed. That is why it helps to understand the options before paperwork starts moving.
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The Main Conditions for BADR
BADR is not a “tick one box” relief. HMRC look at a set of conditions, and you generally need to meet them throughout a qualifying period leading up to the disposal.
The conditions that most often matter when closing a company are:
The company must be a trading company
In simple terms, HMRC expects the company to be carrying on trading activities, or to be the holding company of a trading group. If the company’s main activity is investment, it may not qualify in the way you expect.
This is where property and SPV situations can become tricky. A company that primarily holds investment property can fall outside the trading definition, which can put BADR at risk. Even where there is some trading activity, the balance matters.
Your shareholding and rights must meet the thresholds
For many BADR share disposals, you usually need to hold at least 5% of the ordinary share capital and voting rights, and you may also need to meet conditions linked to entitlement to profits and assets on a winding up.
Share restructures, new share classes, and dilution can all have unintended consequences here.
You must be an officer or employee
Many claims rely on the individual being a director or employee during the relevant period. Resigning too early can create problems.
The qualifying period matters
For many situations, you need to meet the conditions for a period leading up to the disposal. If you are making changes to the business, your role, or the share structure, it is worth checking how those changes affect the timeline.
How to Choose the Right Closure Route
When a solvent company is being closed, the two common routes people consider are:
- Striking off (dissolution)
- A formal solvent liquidation (often used where there is value to extract and things need to be dealt with cleanly)
The tax difference can be significant. The route can influence whether amounts you receive are treated as capital (potentially within the scope of BADR if other conditions are met) or treated as income (taxed very differently).
If you are weighing up strike off, it is worth understanding the tax implications of striking off a company before you decide. A choice that feels “simpler” at Companies House can create avoidable tax friction later.
Practical Steps to Close a Company
Even when the company is solvent, closure is not just an administrative task. It is a process that benefits from a clear plan.
At a high level, you are usually looking to:
- confirm the company’s position (assets, liabilities, any ongoing obligations)
- decide the right route for closure
- deal with assets properly
- handle filings, notices, and final accounts and returns
If you want a straightforward view of the process, our guide to closing a UK limited company lays out the typical steps and what to expect.
Our licensed insolvency practitioners can help you to close your company with confidence. Call us on 0800 1804 935 or email advice@andersonbrookes.co.uk.
Types of Liquidation
The term “liquidation” can feel heavy, but it simply means a formal process to wind up a company and distribute what is left.
In solvent situations, a voluntary liquidation route is often chosen where:
- there are meaningful assets or cash to distribute
- you want a clean, documented process
- you want to reduce the risk of missing something that causes issues later
Our explanation of voluntary liquidation and the different types of liquidation can help you sense-check what applies.
It is also important to be clear about CVL. A CVL is generally the route used for insolvent companies. If your company cannot pay its debts, the decision-making is different, and BADR is usually not the focus. If your company is solvent, it is usually better to frame the discussion around solvent closure routes.
Sectors We Support
We support company directors in every sector, from construction firms and logistics companies to pubs, cafés, restaurants, hotels, retailers and manufacturers. Our advice is always clear, confidential and shaped by real experience in your industry. Whether you’re dealing with unpaid tax, supplier pressure or falling income, our team understands the challenges and will guide you through the best next steps.
Timing Issues to Watch Out For
When people miss out on BADR, it is often not because they ignored the relief. It is because a small timing point was missed. Below are some of the issues we see most often.
Rate changes can create pressure
Because the rate rises to 18% from 6 April 2026, the disposal date matters.
The disposal date is not always the date you “decide” to close. It can depend on the legal and factual steps taken.
Role changes can cause accidental disqualification
If your claim relies on being a director or employee, stepping down too early can be costly. Even if you are done day-to-day, it may be safer to check your timeline first.
Share changes can change the outcome
If you have altered share classes, issued shares to family members, introduced preference shares, or made other structural changes, it is worth reviewing whether you still meet the relevant thresholds.
Stopping trading can start a clock
If trading has ceased, relief conditions can shift. It becomes even more important to document what has happened and when, and to ensure the disposal fits within any relevant windows.
Risks Associated with Strike-Off
If you strike off a company while it still owns assets, those assets can become bona vacantia, meaning they pass to the Crown. This can apply to things people do not think of as “assets”, such as:
- cash left in a bank account
- a tax refund due
- a director’s loan account position that has not been resolved properly
- intellectual property, domain names, or customer lists
- deposits, credits, or small balances with suppliers
If you want a practical view of what can happen, read our guide to company assets after strike-off. In many cases, the solution is not complicated. It is just much easier to deal with assets properly before dissolution than to try to unwind things afterwards.
Director’s Checklist
If you are considering BADR as part of a company closure, these are the checks that usually save the most stress:
- Clarify the goal
Are you trying to extract value tax-efficiently, simplify your affairs, or both? - Confirm solvency and the right route
If the company is solvent, you are usually choosing between strike off and a formal solvent process. If it is insolvent, that is a different conversation. - Sense-check BADR conditions early
Trading status, shareholding thresholds, and your role are the foundations. - Be aware of the timing
Factor in the 2025/26 rate and the rise from 6 April 2026. - List and deal with assets properly
Do not rely on “it’s only a small balance” thinking. Small balances can still cause real problems. - Keep clear records
If HMRC ever asks questions, you want to be able to show the story simply: what happened, when it happened, and why you believed relief applied.
FAQs
“My company owns property. Does that stop BADR?”
Not automatically, but it can be a risk area. The trading requirement matters, and a property-heavy company can be treated differently depending on facts. This is worth checking early, not at the end.
“I have claimed BADR before. Can I claim again?”
Possibly, but the £1 million lifetime limit is the key. It is about how much of that limit you have left.
“Can I just strike the company off and sort the rest later?”
That is where people get caught. Assets left behind can be difficult to recover, and the tax position can be less favourable than expected.
“I’m not sure which route I should take.”
That is normal. Most people are not doing this every day. A short conversation can often clarify the right path quickly.
How We Can Help
At Anderson Brookes, we help you close solvent companies with a clear plan and calm guidance. We focus on getting the route right, dealing with assets properly, and reducing the chances of a tax surprise later.
If you are considering closure and want to understand whether BADR is realistic in your situation, speak to us. We will help you sense-check the rules, the timing, and the practical steps, so you can move forward with confidence.
Call 0800 1804 935, email us at advice@andersonbrookes.co.uk, or get in touch online.
