Selling Your Shares? Why Timing Matters and What Business Asset Disposal Relief Means for You

With the end of the UK tax year approaching on 5 April, many business owners are reviewing their plans for the year ahead, including whether a sale of shares may be on the horizon. For shareholders considering an exit, the way a transaction is structured and timed is becoming increasingly important.

Business Asset Disposal Relief (BADR) is a UK tax relief that can reduce the rate of Capital Gains Tax payable when an individual sells shares in their business, provided certain conditions are met.

BADR, formerly known as Entrepreneurs’ Relief, continues to play a key role in how share disposals are approached. While specialist tax advice is always advised, an awareness of how BADR interacts with the legal process of a share sale can help business owners prepare more effectively.

What is changing?

BADR allows qualifying shareholders to benefit from a reduced rate of Capital Gains Tax (CGT) when selling shares in a trading company, subject to certain conditions relating to ownership and involvement in the business.

To qualify, the following conditions must generally be met for a continuous period of at least two years prior to the sale:

• the individual must be an employee or office holder of the company
• the company must be a trading company, rather than one mainly holding investments
• the individual must hold at least 5% of the company’s shares and voting rights (where the shares are not EMI shares)
• the individual must be entitled to at least 5% of the company’s distributable profits and/or sale proceeds.

This is why timing matters in exit planning: changes to shareholdings, business activities or an individual’s role shortly before a sale can unintentionally break the qualifying period and result in the relief being lost, even where the commercial deal itself is otherwise straightforward.

Historically, the relief applied a 10% rate on qualifying gains up to a lifetime limit of £1 million. However, this position is changing.

From 6 April 2026, the rate of CGT applicable to disposals qualifying for BADR will increase to 18%, a rise from the current 14%. This means that shareholders completing a sale after 6 April 2026 may face a higher tax charge on qualifying gains than those completing earlier. Although the legal requirements for BADR are not changing, the increase in rates means that the timing of a transaction is likely to become a more prominent consideration for many business owners.

Why this matters for share sales

From a legal standpoint, BADR is relevant because it influences how a share sale is planned and executed, as the date on which a transaction legally completes determines the tax year in which any relief may be claimed. Therefore, factors such as regulatory consents, funding arrangements and conditions to completion can become strategically important, particularly where a shareholder is aiming to complete before a rate increase.

For EMI option holders, at least two years must have elapsed between the date of the grant of the options and the disposal of the shares.

Early planning can therefore be key to ensuring that a transaction progresses in line with commercial objectives and within the intended timeframe.

Looking beyond reliefs

While BADR and tax reliefs are important considerations for business owners when deciding whether and when to sell, a share sale involves complex legal and commercial issues that require careful evaluation of risks, liabilities and legal protections. There are also a range of other practical considerations, including valuations, transfer restrictions, warranties and indemnities, management incentives and third-party consents.

Addressing these early can help avoid delays and preserve flexibility when opportunities arise.

How mlplaw can help?

mlplaw’s Corporate team regularly supports business owners through share sales, from early discussions and structuring through to negotiation and completion.

We work closely with clients and their professional advisers to ensure transactions are delivered efficiently, commercially and with a clear focus on achieving the client’s wider objectives.

If you are considering a share sale or would like to discuss how to prepare your business for a future disposal, our Corporate team would be pleased to support you.