HMRC is issuing a second round of letters to taxpayers who claimed Business Asset Disposal Relief (BADR) in their 2024/25 Self Assessment returns and may have exceeded the GBP 1 million lifetime limit, asking them to amend returns where necessary.
The UK HM Revenue & Customs (HMRC) is issuing a second round of letters to taxpayers who claimed Business Asset Disposal Relief (BADR) in their 2024/25 Self Assessment tax return and may have exceeded the GBP 1 million lifetime limit. The letters, sent to individuals whose claims appear to breach the cap, ask recipients to amend their returns where necessary.
Two versions of the letter are being distributed, depending on the taxpayer’s position. The first is sent where HMRC’s records indicate the individual had already exceeded the lifetime limit before submitting a BADR claim for 2024/25. In these cases, the taxpayer is instructed to amend their return and remove the claim for BADR.
The second letter is issued where HMRC believes the amount claimed in the 2024/25 tax return has taken the taxpayer over the lifetime limit. Recipients are asked to revise their return so that the total BADR claimed across 2024/25 and earlier tax years does not exceed GBP 1 million.
Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, reduces the Capital Gains Tax (CGT) due when qualifying business assets are sold or otherwise disposed of, including shares in a company. For successful claims, CGT applies at 10% in 2024–25, increasing to 14% in 2025–26 and 18% in 2026–27.
The relief generally covers disposals of all or part of a business, such as the sale of a sole trader business, shares in a personal company, or assets used in a business after trading has ceased. As BADR is restricted to a lifetime limit of GBP 1 million, HMRC’s latest compliance campaign signals that claims exceeding this threshold are likely to be identified and challenged.
