Business Asset Disposal Relief (BADR)

BADR. What is it?

BADR (Business Asset Disposal Relief) is a valuable tax relief that applies to all qualifying Holiday Lets and could save you thousands of pounds in Capital Gains Tax. It’s a complicated process though and doesn’t automatically apply.

Let’s set the scene.

Capital Gains Tax (CGT) is payable on the profits made on most assets including property. 

When you sell your family home. You’re covered by something called PRR (Principal Private Residence) relief. This means you pay zero tax – great!

However, when you sell a property that’s not your main home, you usually pay CGT at 28% (24% in 2025) on any profit. Made a decent profit on that Buy-to-Let in Bangor? The taxman will be wanting a large chunk of it.

The situation for a Holiday Let is very different.

Qualifying Holiday Lets are classed as a trading business. Although the 2024 budget announced the abolition of this special status, it’s still available until April 2025 and likely until 2026 given no legislation was put to parliament prior to the election.

What does this mean?

This means that the sale of a qualifying Holiday Let will pay Capital Gains Tax at just 10% (versus 28/24% for other property).

Qualifying Criteria

1. The Holiday Let must be a ‘qualifying one’. This means it must have been let for 105 days and available for 210 days in each tax year. Tax returns should have been completed for the years under the FHL sections of SA105. Don’t worry about Wales ‘182 day’ rules for Business Rates; they’re not relevant for BADR.
2. The Holiday Let must have qualified for at least TWO years prior to the sale.
3. The sale must be within 3 years of the business ceasing. In reality, your business will cease when you sell it or stop taking bookings, so this criteria is rarely an issue.

Typical Example

Susan bought a property in Llanberis in 2012 for £120k. The property was tenanted from 2012 to 2020. The tenants moved out in 2020 and Susan spotted the opportunity to make better returns as a Holiday Let due to the ‘Staycation’ boom. She’s done well out of this but bookings for 2024 are down as she now decides to sell up. She gets a local estate agent to value the property and is pleased to hear it is now worth £220k. Susan is a higher rate tax payer, although basic rate tax payers will not be significantly different.

Let’s look at the position if Susan had kept the property as a tenanted buy to let. 

The CGT bill is a whopping £27k. Enough to stop anyone win their tracks.

But Susans property is a qualifying Holiday Let, in these circumstances it doesn’t matter that the property was a Buy-to-Let for 8 years, the WHOLE of the gain qualifies for BADR at 10% thanks to a little known tax exemption.

Susan’s tax bill under BADR is just £9,700, a far more palatable result.

Things to think about.

We’ve simplified the situation here for illustration purposes. In reality BADR claims are complex and very likely to attract enquiries from HMRC. 

Why not let an expert handle the process for you? We offer a no obligation assessment of your situation and fixed price fees for dealing with the whole transaction.

If you’re thinking of selling your Holiday Let in north Wales, speak to us first. We’re experts in this area. You have nothing to lose and potentially thousands to gain.