You’ll usually need to pay Capital Gains Tax if you dispose of an asset, but you might be entitled to Business Asset Rollover Relief if you use the money to replace the asset with a new one. In this blog, we’ll explain exactly what BARR is, who’s eligible, and the potential benefits.
But first, what is Capital Gains Tax?
Capital Gains Tax is a type of tax you pay on the profit (or gain) you make when selling or disposing of an asset you own. This normally applies to individuals and business structures where there’s no legal distinction between you or the business. For example, a sole trader or a general partnership.
Limited companies can make capital gains too (for example, because they’ve disposed of a company asset), but they won’t pay Capital Gains Tax – they’ll pay Corporation Tax on the gain instead.
It’s important to note that not every asset you dispose of is subject to Capital Gains Tax. For example, you won’t pay Capital Gains Tax if you sell your only home or your car as long as it’s been used completely for personal use.
How much is Capital Gains Tax?
How much Capital Gains Tax you pay depends on what the asset is, and how much of a gain you’ve made.
| Rate of CGT | |||
| Asset Type | Type of Taxpayer | 2025/26
| 2026/27
| |
| Most chargeable assets | Basic | 18% | 18% |
| Higher | 24% | 24% | |
| Residential property | Basic | 18% | 18% |
| Higher | 24% | 24% | |
| Assets qualifying for BADR | 14% | 18% | |
What is Business Asset Rollover Relief?
Business Asset Rollover Relief allows you to delay paying tax on any Capital Gains you make when selling or ‘disposing’ an asset as long as all or part of the gain is used to purchase a new asset.
This doesn’t mean you’re off the hook with Capital Gains Tax forever, but you won’t have to pay it unless you dispose of the new asset.
If you plan to buy a new asset with the profits from selling the previous one, but haven’t yet got round to it, you can claim provisional relief in the meantime. You may also be eligible to claim relief if you use any of the proceeds to improve assets you already own.
For example
Let’s say you’re a sole trader, and recently sold your old office building for £300,000. You originally bought it for £200,000, so you’ve made a £100,000 gain.
This gain would normally be subject to Capital Gains Tax (CGT), but you used all of the proceeds to purchase a new office building. This means you may be eligible for Business Asset Rollover Relief.
If you are eligible, the £100,000 gain is ‘rolled over’ – which means it’s deducted from the base cost of your new office building. So, instead of having a base cost of £300,000, your new building is treated as if it cost £200,000 if you ever need to work out CGT for disposing of the new building.
You won’t pay CGT immediately. Instead, the gain becomes deferred, and you’ll pay CGT only when you sell the new property, and this will use the new base cost.
In a nutshell, the gain you made from the sale of your old property has been transferred to the new one, delaying your CGT bill until you eventually sell the new asset.
Who is eligible for BARR?
Business Asset Rollover Relief can be used by both sole traders and limited companies, and can be claimed as either full or partial relief. There are different requirements depending on which one you’re going for, which we explain below:
Full relief
To qualify for Business Asset Rollover Relief (in full), you need to hit certain criteria:
- You must buy the new asset within 3 years of selling or disposing of the old one
- Both your old and new assets must be used in your business
- Your business must be trading when you sell the old assets and purchase the new ones
Partial relief
You may be able to claim partial relief if:
- You reinvest part of your proceeds from selling your old asset/s
- Your old assets were used partly in your business
- You use some of the proceeds to buy depreciating assets – for example fixed plant and machinery or assets expected to last less than 60 years. We go into more detail about depreciating assets in a separate article.
This is a complicated area of the tax rules, so we strongly recommend getting help from your accountant for more information!
What can I claim Business Asset Rollover Relief on?
You can claim Business Asset Rollover Relief on things such as land, buildings, and fixed plant or machinery – for example, a forklift or office furniture.
How do I apply for Business Asset Rollover Relief?
To apply for this relief, you need to fill out a form – HS290 Business asset roll-over relief. You’ll include this in your Self Assessment or MTD Income Tax return.
Should I claim Business Asset Rollover Relief or Business Asset Disposal Relief?
This really depends on what you plan to do once you’ve sold the assets.
- Business Asset Disposal Relief (BADR) reduces the amount of Capital Gains Tax you need to pay after disposing of an asset, rather than delaying it. It could be the better option if you don’t plan to reinvest in any new assets any time soon, or if you’re exiting the business.
- Business Asset Rollover Relief (BARR) on the other hand, may be more beneficial to anyone looking to reinvest their proceeds rather than taking the profit now, or for individuals who want to preserve cash flow and defer tax.
Everyone’s situation is different, so be sure to speak with your accountant for more advice.
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