News and insights from the Verallo team
HMRC issues notices on Business Asset Disposal Relief
HMRC has begun notifying taxpayers whose BADR claims for 2024/25 could take them over the £1 million lifetime limit, prompting some to review their returns.
Understanding BADR
BADR offers business owners a reduced capital gains tax rate on qualifying disposals, such as shares in a company or other eligible business assets. Formerly known as Entrepreneurs’ Relief, it remains an important tool for planning the sale of business interests efficiently.
For the 2024/25 tax year, qualifying gains are subject to a 10% tax rate, rising to 14% in 2025/26 and 18% in 2026/27. The relief carries a lifetime cap of £1 million per individual, down from the previous £10 million limit in place before March 2020.
What HMRC letters mean
HMRC’s correspondence varies depending on each taxpayer’s situation:
- Lifetime limit already exceeded: Taxpayers may be asked to amend their 2024/25 return if HMRC records show the lifetime allowance had already been reached prior to their latest claim.
- Limit exceeded by recent claim: If the 2024/25 claim pushes total gains above the £1 million cap, HMRC requests an adjustment to bring the cumulative relief within the allowed limit.
If you believe your BADR claim is correct, the letters provide guidance on how to contact HMRC. Failing to respond by the date specified may result in HMRC adjusting your return or opening a formal enquiry. Letters also explain potential interest charges, penalties, and how these may be reduced. Agents will receive copies of relevant correspondence.
Next steps
If you’ve received an HMRC notice or are uncertain about the status of your BADR claim, Verallo’s Tax team can help. We provide practical guidance to ensure your return is accurate, compliant, and optimised. Get in touch to discuss your options.