Business Asset Disposal Relief (BADR): What’s changing

The government’s tinkering at the edges of the tax system continues—this time with Business Asset Disposal Relief (BADR). Two key changes are scheduled for April 2025 and 2026, both of which will impact the tax savings available to business owners selling shares or exiting their businesses.

If you’re considering a sale or share buyout, it’s worth taking stock of what’s changing and why speaking to us sooner rather than later regarding your plans for exit will be beneficial.

A quick reminder: what is BADR?

BADR (formerly known as Entrepreneurs’ Relief) allows for a reduced 10% Capital Gains Tax rate on qualifying disposals, up to a lifetime limit of £1 million. For many business owners, this represents a significant tax saving compared to the standard CGT rate of 24% for higher-rate taxpayers.

However, that 10% rate is no more.

What’s changing?

The government has announced two key changes to BADR that will increase the tax burden on business owners. Here’s what you need to know:

1. From 6 April 2025, the BADR rate increased from 10% to 14%.
2. From 6 April 2026, the BADR rate will rise again to 18%.

These changes will significantly affect the amount of tax relief you can claim, especially for those planning substantial business disposals or sales.

What does this mean in real terms?  

Let’s put this into context. If you are selling a business worth £1 million, the tax impact will change as follows:

While still lower than the standard CGT rate, yes—but a notable shift in the wrong direction if you’re aiming to maximise relief.

This is going to have a big impact on your retirement plans. For example, if you’ve calculated you need £1.8 million to retire with the lifestyle your desire, you will need to increase the profits in your business by 10.53% to sell your business in 2027 compared to selling it in 2024.

Why does this matter now?

For any business owners planning a sale, buyout, or exit in the next couple of years, these changes create a clear timeline. Waiting too long may reduce the amount of tax relief available—particularly on larger transactions.

Some key areas to review:

• Exiting shareholders – If you’re planning a shareholder buyout, completing it before April 2026 could help maximise relief
• Management Buyouts (MBOs) – For owner-managed businesses looking to pass to the next generation of leaders, bringing plans forward could increase tax efficiency
• Larger disposals – Any planned disposals of a significant size may be better completed soon

What should you do now?

This isn’t a call for knee-jerk reactions, but it is a strong case for proactive planning.

As with most tax changes, the impact will depend on the specifics of your situation. We’d strongly recommend reviewing your exit strategy, particularly if it involves share sales in the next 12–24 months. The sooner you act, the more flexibility you’ll have and the bigger impact you can have on your profits to achieve the same money in your pocket.

If you’re not sure what this means for you or want to run through options, get in touch. We’ll walk you through the numbers and help put a sensible plan in place.