Business Asset Disposal Relief (BADR) changes 2027: Selling your business

If you’ve spent years building a business, the eventual sale is about more than agreeing a price. It’s about how much you’ll actually receive in your pocket, what that means for your future or your families future and whether the plans you’ve made will give you the financial freedom you’re working towards.

Changes to Business Asset Disposal Relief (BADR), announced over the past two Budgets, mean that the tax position is becoming less generous. The Autumn Budget 2026 has now reduced the lifetime limit on qualifying gains from £1 million to £500,000 from April 2027.

At the same time, the Government announced a new Founders’ Relief, offering a 10% Capital Gains Tax rate on up to £10 million of qualifying gains. That sounds attractive, but the proposed conditions are highly restrictive. It is designed for founders of high-growth, innovative companies, rather than being a general replacement for BADR.

For most owners, BADR will be the relevant relief. The question is how much it could save you and what do the changes mean for you.

A quick reminder: What is Business Asset Disposal Relief (BADR)?

Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, reduces the Capital Gains Tax (CGT) payable when you sell a qualifying business or shares in a qualifying business.

The relief has become less generous in recent years. The tax rate increased from 10% to 14% in April 2025, then to 18% in April 2026.
Until April 2027, the lifetime limit remains £1 million of qualifying gains per person. From 6 April 2027, that limit will fall to £500,000.
This matters because the relief applies to qualifying gains, not the entire sale proceeds. The amount of tax you pay will depend on your gain, how much of your lifetime limit you have already used and your wider tax position.

What’s changing?

  1. The BADR rate has increased to 18%. The rate of CGT on qualifying gains rose from 10% to 14% in April 2025 and increased again to 18% from 6 April 2026. The tax saving compared with the standard 24% CGT rate for higher-rate taxpayers is now a lot smaller.
  2. The lifetime limit will halve from April 2027. From 6 April 2027, the maximum lifetime gains eligible for BADR will fall from £1 million to £500,000 per person.  Any qualifying gains above the available limit will be taxed at the applicable standard CGT rates, rather than the BADR rate. For a higher-rate taxpayer, that will generally mean 24%, subject to their individual circumstances.
    The government estimates that three-quarters of BADR claimants will still receive relief on their entire gain. However, for owners expecting a larger return from selling their business, the reduction will make a meaningful difference.

What could the change cost you?

Disposal before 6 April 2027Disposal from 6 April 2027
Capital gain£1,000,000£1,000,000
Gain qualifying for BADR£1,000,000£500,000
CGT at the BADR rate of 18%£180,000£90,000
Remaining gain taxed at 24%£0£120,000
Total CGT£180,000£210,000
Amount left after CGT£820,000£790,000

Key takeaway: An additional £30,000 in CGT on a £1 million gain.

The difference will depend on your circumstances, including your previous claims and the size of your gain. But the principle is straightforward: the more you expect to realise above the new £500,000 limit, the more important it becomes to understand the tax implications.

And there’s a wider question here: If you’re relying on the proceeds from your business to fund retirement, another venture or your next chapter, it’s not just the sale price that matters, it’s what you get to keep.

Founders’ Relief: is this an alternative?

The government has also announced Founders’ Relief, which is intended to give qualifying founders and early investors in high-growth, innovative companies a 10% CGT rate on up to £10 million of lifetime gains from 6 April 2027.

On the face of it, this sounds like a generous alternative to BADR, particularly for someone expecting a substantial gain on selling their business.However, the proposed eligibility criteria are much narrower. The relief is aimed at a specific type of company and founder, not business owners generally.

Under the government’s proposals, the individual would need to:

  • Held at least 25% of the ordinary shares from the point trading began
  • Have held those shares for five years (or more) up to the point of sale
  • Have a business turnover of at least £10m a year and at least 15 full time staff
  • At least £1.5m of eligible Research & Development expenditure must have been claimed and approved during the three years before sale
  • Have a 25% compound growth over a specified period (how this is measured is not yet clear)

Certain activities, including property development and financial services, are excluded from the proposed relief.

These are proposed rules, and the government is consulting on the detailed design before legislation is finalised. The relief is intended to apply to qualifying disposals from 6 April 2027.

The important point is that Founders’ Relief is therefore not a like-for-like replacement for BADR.

A business owner who has spent 20 years building a successful, profitable company, employing people and creating value may have a substantial gain on exit but still fail to meet the proposed growth, innovation or company eligibility tests.  Equally, someone who has built a business over many years may not have held the required 25% shareholding from the start of trading. As you can see, it has very narrow rules.

What should business owners be thinking about? 

We always say this, but it’s an important reminder that exit planning needs to start well before a sale is on the table.  There are several questions to consider now:

1. What do you actually need from your exit? 

Start with your personal plans. How much do you need to fund your retirement, support your family or pursue other opportunities? What level of proceeds would give you the options you want?

Work backwards from that figure, taking into account potential tax, transaction costs, and other liabilities. This helps you understand whether your current plans are likely to deliver the outcome you need.

2. How much of your BADR allowance have you used? 

The lifetime limit applies to qualifying gains across your lifetime. If you have already claimed BADR on a previous disposal, the limit now falling to £500,000 from April 2027, is particularly important.

3. When should you sell?

This is a big one we’re being asked for those close to selling wondering if they can push it over the line before April 2027. It always depends on your individual circumstances. Bringing a sale forward may be the right answer but it also may not. A rushed transaction, a lower sale price or unsuitable deal structure could outweigh any tax saving! The right approach is to compare the option and make a decision based on the overall outcome.

We’ve got a lot of experience in helping business owners sell their businesses, and we’ve completed more sales in the last three years than ever before. Our role goes well beyond getting the financial information ready. We help prepare the business for sale, bring the right people together and act as a sounding board, adviser and negotiator between the buyer and seller and their respective solicitors.

In many ways, we’re the person in the middle, helping to keep things moving, manage expectations, work through sticking points and find a way forward when negotiations get difficult. Ultimately, we want to help you achieve the best possible outcome, not simply get a deal done.

4. Is the business ready to sell?

Tax is only one part of a successful exit. A business that relies heavily on its owner can be harder to sell, harder to value and more difficult to hand over. Strengthening your management team, developing future leaders, improving financial reporting and reducing reliance on you can all help prepare the business for a sale.

These changes take time. The earlier you start, the more options you are likely to have.

Plan for the outcome you want, not just the tax change

There is no single answer to how these changes could affect your exit. For some owners, reviewing the timing of a planned sale will be important. For others, the priority may be understanding their likely tax bill, improving the value of the business or putting a longer-term succession plan in place.
What matters is looking at the whole picture: the business you have built, the value you want to realise and what you want life to look like afterwards.
At A4G, we believe the best decisions come from looking ahead rather than reacting to changes when they arrive.
If you are considering selling your business, planning a management buyout or simply want to understand what your business could mean for your future, speak to one of our Principal Advisers. We can help you work through the numbers, consider your options and put a plan in place that reflects what you want to achieve.
Talk to A4G

Contact me today!

Emma White

FCA

Co Managing Partner

01474 853856

Send me a message

Other posts of interest

See more articles