Upcoming Changes to Business Asset Disposal Relief (BADR): What You Need to Know

If you’re a business owner considering a sale or wind-down in the near future, it’s important to be aware of upcoming changes to Business Asset Disposal Relief (BADR), which will significantly affect the amount of Capital Gains Tax (CGT) you pay.

Previously known as Entrepreneurs’ Relief, BADR offers a reduced rate of CGT on the sale of all or part of a business, provided certain conditions are met. The relief applies to lifetime gains of up to £1 million, offering a valuable tax saving for qualifying individuals.

The current position

From 6 April 2025, the rate of CGT on gains that qualify for BADR increased from 10% to 14%, meaning the tax benefit for business owners has already begun to diminish. That 14% rate is now in force and will apply to disposals that meet the BADR conditions.

However, the government has already announced that this rate will rise again to 18% from 6 April 2026. If no action is taken before this change, the tax rate on a qualifying disposal will rise to 18%, an 80% increase compared to the rate available prior to April 2025.

If you are planning a business sale, winding up a company, or passing ownership to others, these changes could significantly impact your tax position and overall net proceeds.

What should you consider now?

If you are considering a disposal before April 2026, we recommend reviewing your position now. There is a limited window to plan and implement any transactions that could still benefit from the current 14% rate. In particular, you should consider the following:

• Timing: Bringing forward a sale or company wind-down could help secure the 14% rate

• Qualifying conditions: Make sure you continue to meet the conditions for BADR — including holding at least 5% of the shares, being an officer or employee, and holding the shares for at least two years before the disposal.

• Spouse planning: If your spouse or civil partner is also involved in the business, there may be an opportunity to use their £1 million BADR limit, provided they meet the qualifying conditions.

• Members’ Voluntary Liquidation (MVL): If your company has retained profits and you're planning to close it down, a formal MVL may allow you to extract funds as a capital gain rather than income, potentially qualifying for BADR.

• Alternative structures: Where appropriate, options such as share restructures, or phased sales may provide a more efficient route depending on your long-term objectives.

Next steps

We recommend reviewing your business exit plans now. While a sale or wind-down may not be imminent, preparing in advance is essential — especially given the time it takes to structure a transaction, meet qualifying conditions, and complete legal and financial due diligence.  The clock is ticking.

Taking early advice gives you more control over the timing and tax treatment of a future disposal and may help secure the current 14% BADR rate before the planned increase to 18% in April 2026.

If you would like to discuss how these changes may affect your plans, or explore the available options, please get in touch with us.

Written by:  Heather Langtree