Business Asset Disposal Relief (BADR), formerly known as entrepreneurs' relief, gives a reduced rate of Capital Gains Tax on a qualifying disposal of a trading business. For a dentist selling a practice, that can mean the gain on goodwill and other business assets is taxed at the BADR rate rather than the main CGT rate, up to a £1 million lifetime limit.
The relief is valuable, but the qualifying conditions are strict and easy to fall foul of. This guide focuses on what actually qualifies: the conditions by business structure, the assets that count, the common disqualifiers that catch dentists out, and the planning that the 2-year rule demands. For the rate-timing decision around the 6 April 2026 increase, see our separate guide on the BADR rate rise and disposal-date timing.
What is Business Asset Disposal Relief?
BADR applies a reduced Capital Gains Tax rate to qualifying gains on the disposal of all or part of a trading business, up to a lifetime limit of £1 million per individual. The lifetime limit was cut from £10 million to £1 million on 11 March 2020 and is cumulative, so any earlier BADR or entrepreneurs' relief claims count towards it.
The relief itself is set out in the Taxation of Chargeable Gains Act 1992, sections 169H to 169S. The rate is not fixed: it depends on the date of disposal.
| Date of disposal | BADR rate on qualifying gains |
|---|---|
| Up to 5 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| From 6 April 2026 | 18% |
Gains above the £1 million lifetime limit do not get the BADR rate. They are taxed at the main rate of Capital Gains Tax, which Finance Act 2024 unified from 30 October 2024 at 18% to the extent the gain falls within the basic-rate band and 24% above it. Before claiming, you also have the annual exempt amount to set against gains, which is £3,000 for both 2024/25 and 2025/26.
Qualifying Conditions for Dental Practices
To qualify for business asset disposal relief, the conditions have to be met throughout the 2-year period ending on the date of disposal. What those conditions are depends on how the practice is owned.
Sole Trader Dental Practices
For an associate or principal operating as a sole trader, you must satisfy these conditions:
- Trading business: the practice must be a trading business, not an investment activity.
- Ownership period: you must have owned the business for at least 2 years before the disposal.
- Disposal of the business: you are disposing of the whole of the business, or a distinct part of it, rather than selling individual assets in isolation.
You do not need a minimum percentage stake as a sole trader, because you own the whole business. The key qualification test is that what you are selling is a genuine trading business you have run for the 2-year period.
Partnership Dental Practices
Partners in a dental practice dispose of their interest in the partnership. The conditions mirror the sole trader rules applied to the partnership share:
- Partnership interest: you must dispose of the whole or part of your interest in the partnership's business.
- 2-year rule: you must have held that interest in a trading partnership for at least 2 years before disposal.
- Trading partnership: the partnership must carry on a trade throughout that period.
Limited Company (Share Sale)
If the practice is incorporated and you are selling shares, the conditions are more demanding. Throughout the 2 years to disposal you must meet all of the following, and the company must be trading throughout:
- Share capital: you hold at least 5% of the ordinary share capital.
- Voting rights: you hold at least 5% of the voting rights.
- Economic entitlement: you are entitled to at least 5% of the distributable profits and at least 5% of the net assets available to equity holders on a winding up.
- Officer or employee: you are an officer or employee of the company (or of a company in the same trading group).
The 5% economic-entitlement test is the one most often missed, because it is possible to hold 5% of the shares and votes but, through alphabet shares or a complex capital structure, not be entitled to 5% of the profits and assets. If you are weighing incorporation against a sole trade, our overview of whether section 162 incorporation relief fits a dental practice explains how the 2-year clock restarts on the new company.
The Assets That Qualify on a Practice Sale
On a qualifying disposal of the practice as a going concern, BADR can apply to the gains on the business assets sold, which for a dental practice typically include:
- Goodwill: usually the largest single element of the gain on a practice sale.
- Patient or list value: where it is separately identifiable and valued.
- Equipment and fixtures: dental chairs, imaging equipment and practice fit-out, subject to the capital allowances position on each item.
- Property: the surgery premises, where used in the trade and disposed of as part of, or associated with, the business disposal.
How the total price is split between these assets affects the tax, so the apportionment in the sale contract matters. We cover that in detail in our guide to apportioning the price between goodwill and equipment. Personal assets and investments held alongside the practice do not qualify.
Common Qualification Issues for Dentists
Several situations can take a disposal outside BADR, often without the owner realising until the sale is under way.
Investment Activity Rather Than Trading
BADR requires a trading business. Where a practice or company carries on substantial non-trading activity, such as letting property to unconnected businesses or holding a sizeable investment portfolio, HMRC can argue the business is not trading for these purposes. For most owner-run surgeries this is not a problem, but a structure that mixes the practice with a property letting business needs care.
Selling Assets in Isolation
BADR is a relief on the disposal of a business, not on the disposal of an asset used in a continuing business. Selling, say, an item of equipment while you carry on practising does not qualify. The relief is built around disposing of the whole business, a distinct part of it, or, for shares, your shareholding.
Falling Below the Conditions Within the 2 Years
Because every condition has to hold throughout the 2-year period, a change shortly before sale can break qualification. For a share sale, ceasing to be an officer or employee, or a share issue that dilutes you below the 5% thresholds, can be enough. For a sole trader or partner, the test is simpler but the 2-year ownership requirement still has to be satisfied.
Reporting and the Self Assessment Position
The gain on selling a dental practice, including the goodwill gain, is reported through your Self Assessment tax return for the year of disposal, and the BADR claim is made on that return. The separate 60-day Capital Gains Tax return applies only to disposals of UK residential property, so it does not apply to the goodwill or business-asset gain on a practice sale. If part of the consideration is deferred or contingent, the timing and amount brought into charge can be more involved, which we cover in our guide to earn-outs and deferred consideration.
Planning for BADR Qualification
Because the conditions run for 2 years before disposal, the planning has to start well ahead of a sale.
Structure Ownership Correctly
If you are incorporating, make sure the share structure will deliver 5% of shares, votes, profits and net assets, and that you remain an officer or employee. The 2-year clock for a share sale runs from when the company conditions are first met, which is usually incorporation, so an incorporation immediately before a planned exit will not give immediate BADR on the shares.
Keep the Business Trading
Maintain the practice as a genuine trading business through to disposal, and avoid letting non-trading activity grow to a level that puts the trading status in question. If the company stops trading, relief can still be available on a share disposal made within 3 years of cessation, but the conditions still have to have been met in the run-up.
Plan the Disposal as a Business Disposal
Dispose of the practice as a going concern rather than stripping out and selling assets piecemeal, so the disposal sits within the scope of the relief.
BADR Alongside Other CGT Reliefs and Allowances
BADR is not the only relief in play on a practice sale. Depending on the situation you may also use:
- Annual exempt amount: £3,000 per person for 2024/25 and 2025/26, set against the gain before tax is calculated.
- Gift holdover relief: where business assets are transferred to family rather than sold, which can defer the gain.
- Incorporation relief: rolling an unincorporated practice into a company under section 162, which defers the gain and can position a later share sale to use BADR.
For the wider picture on how a practice sale is taxed, including the order in which allowances and reliefs apply, see our guide to Capital Gains Tax on selling a dental practice and our 2026 BADR overview.
A Worked Illustration
Take Dr Patel, a sole-trader principal who has owned her practice for more than 2 years and sells it as a going concern in the 2025/26 tax year, realising a chargeable gain of £400,000 on goodwill and equipment. After the £3,000 annual exempt amount, £397,000 is within the £1 million BADR limit and is taxed at the 14% BADR rate applying in that year, giving Capital Gains Tax of £55,580. Had the same disposal completed on or after 6 April 2026, the qualifying gain would instead be taxed at 18%. Figures are illustrative and the exact position depends on the asset split and the rest of her tax position for the year.
Professional Advice
BADR qualification turns on detail: trading status, the 5% tests for a share sale, the 2-year period and the way the disposal is structured. For dental practices with mixed activities or a complex share structure, those points are worth checking against the documents well before a sale rather than at completion.
A specialist dental accountant can confirm whether the conditions are met, flag anything that risks taking the disposal outside the relief, and structure the disposal so the qualifying gain is reported correctly through Self Assessment. Given the sums involved on a practice sale, it is sensible to take advice early in the exit-planning process.