Business Asset Disposal Relief: October 2026 Budget Changes

If you are thinking about selling your business, selling shares in your company, or closing it down, Business Asset Disposal Relief (BADR) can cut the Capital Gains Tax you pay on the profit. The Budget on 28 October 2026 made a big change to it: from 6 April 2027, the amount of gain you can claim relief on is halved.

This guide explains what BADR is, who qualifies, what the Budget changed, and what to think about if you are planning an exit. Rates and rules are accurate as at 5 November 2026.

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What Is Business Asset Disposal Relief?

BADR (known as Entrepreneurs' Relief before April 2020) lowers the rate of Capital Gains Tax when you sell or give away all or part of your business.

Without BADR, gains on shares and business assets are taxed at the normal Capital Gains Tax rates of 18% (within your basic rate band) or 24% (above it). With BADR, qualifying gains are taxed at 18%, however much you earn.

There is a lifetime limit on the gains you can claim BADR on. It is a total across your whole life, not a yearly allowance. Gains above the limit are taxed at the normal rates.

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What the October 2026 Budget Changed

1. The Lifetime Limit Halves to £500,000

For qualifying disposals made on or after 6 April 2027, the BADR lifetime limit falls from £1 million to £500,000. The 18% rate itself does not change.

BADR you have already claimed still counts. The new £500,000 limit takes account of relief you have claimed in the past. If you have already used £500,000 or more of BADR at any point, you will have nothing left to claim on disposals from 6 April 2027.

Who is affected? HMRC estimates around 51,000 people claim BADR each year and that three-quarters of them will still get relief on their whole gain. Around 13,000 people a year with larger gains will lose out.

The government will make the change in the Finance Bill 2026-27, so it is not yet law.

2. A New Founders' Relief (Still Being Consulted On)

The Budget also announced a new Founders' Relief for disposals from 6 April 2027. It is aimed at founders of fast-growing companies, not most small businesses:

• 10% Capital Gains Tax on up to £10 million of gains in your lifetime
• You must have held at least 25% of the company's ordinary shares from when it started trading (or started preparing to trade), and held the shares for at least five years
• You must have been UK resident for at least five tax years in a row before the sale
• The company must have turnover of at least £10 million and at least 15 full-time-equivalent employees, and pass two of three tests: fast turnover growth, fast staff growth, or at least £1.5 million of R&D spending

The £10 million limit is reduced by any BADR or Investors' Relief you claim from 6 April 2027. The government expects only around 600 people a year to qualify.

The technical consultation closes on 30 November 2026, so the details may change before it becomes law.

3. Investors' Relief

No change was announced to Investors' Relief, the separate relief for outside investors in unlisted trading companies. It keeps its own £1 million lifetime limit. As above, claims made from 6 April 2027 reduce the Founders' Relief limit.

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How Much More Tax Could You Pay?

The most the change can cost you is £30,000: the £500,000 of gains that no longer qualify, taxed at 24% instead of 18%, is an extra 6%.

Example 1: A £300,000 gain. You sell your company shares, have never claimed BADR before, and the whole gain qualifies.

• Before or after 6 April 2027: £300,000 × 18% = £54,000

No difference. Your gain is within both limits.

Example 2: A £900,000 gain. Same situation, but the gain is larger and you pay higher-rate tax.

• Sale before 6 April 2027: £900,000 × 18% = £162,000
• Sale on or after 6 April 2027: (£500,000 × 18%) + (£400,000 × 24%) = £90,000 + £96,000 = £186,000

That is £24,000 more tax.

Example 3: You have claimed BADR before. You claimed BADR on a £400,000 gain when you sold a previous business in 2022. You now sell a second business with a qualifying gain of £300,000.

• Sale before 6 April 2027: £600,000 of your £1 million limit is left, so the full £300,000 is taxed at 18% = £54,000
• Sale on or after 6 April 2027: only £100,000 of the new £500,000 limit is left. (£100,000 × 18%) + (£200,000 × 24%) = £18,000 + £48,000 = £66,000

These examples ignore the £3,000 annual exempt amount and assume any gain outside BADR is taxed at 24%.

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Can You Beat the Deadline?

If you were already planning to sell, completing before 6 April 2027 could keep you within the £1 million limit. But the government has added rules to stop people locking in the old limit artificially.

Contracts signed before 6 April 2027 but completed after. Normally, the date of a sale for Capital Gains Tax is the date the contract becomes unconditional, not the completion date. Under the new rules, if you sign an unconditional contract before 6 April 2027 and complete on or after that date, the £500,000 limit applies, unless:

• you can show the contract was not signed to get a tax advantage from that timing rule, or
• if the buyer is connected to you (for example, a family member or a company you control), the contract was signed for wholly commercial reasons.

If you rely on either exception and the gain is over £100,000, you will need to make a statement to HMRC.

Share swaps and reorganisations. If you exchange your shares for shares in another company and elect to claim BADR at the time of the swap, extra rules can apply the £500,000 limit. This mainly catches swaps into a company owned by the same people. An election made on or after 6 April 2027 to claim BADR on an earlier share swap is treated as a disposal at the date of the election, so the £500,000 limit applies.

Our advice: a genuine sale that completes before 6 April 2027 is fine. Do not rush into a sale, or set up a paper transaction, just to beat the deadline. Selling at the wrong time or price can cost far more than £30,000. If your gain is likely to be over £500,000, take advice early.

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Who Qualifies for BADR?

The qualifying rules are not changing. You can claim BADR if you are:

Selling Shares in Your Own Company

For at least two years up to the date of sale:

• the company must be a trading company (or the holding company of a trading group), not an investment company
• you must be an officer or employee of the company — company directors normally meet this
• you must hold at least 5% of the ordinary shares and 5% of the voting rights, and be entitled to at least 5% of the profits and assets (or 5% of the sale proceeds)

If the company stops trading, the shares can still qualify if you dispose of them within three years of it stopping.

Selling All or Part of Your Business as a Sole Trader or Partner

You must have owned the business for at least two years. Selling one asset on its own, such as a van or a piece of equipment, does not count. You must be selling all or a distinct part of the business itself.

If you close the business, assets you sell within three years of closing can still qualify.

Selling an Asset Your Business Uses

If you personally own an asset your company or partnership uses, such as premises, selling it can qualify as an "associated disposal". You must be selling it as part of reducing your stake in the business by at least 5%. Relief can be reduced if you charged the business rent.

Trustees

Trustees can claim in some cases where a beneficiary qualifies, and it uses up the beneficiary's lifetime limit.

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How to Claim

You claim BADR on your Self Assessment tax return, or on a separate claim form. The deadline is the first anniversary of the 31 January after the end of the tax year in which you made the disposal:

Remember that the Capital Gains Tax itself is still due by 31 January after the end of the tax year, even though you have longer to make the claim.

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BADR Over the Years

The relief has been cut steadily since 2020:

Sources: HMRC policy paper "Capital Gains Tax: new Business Asset Disposal Relief lifetime limit" (29 October 2026); HMRC policy paper "Capital Gains Tax: introduction of a new Founders' Relief" and Founders' Relief technical consultation (28 October 2026); Budget 2026 Overview of Tax Legislation and Rates, paragraphs 1.32–1.33; HMRC helpsheet HS275 Business Asset Disposal Relief (2026).

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Need Help?

If you are planning to sell or close your business in the next year or two, the timing and structure of the sale now matter more than ever. A short conversation now can save a lot of tax later.

At Companies999, we help limited company directors and sole traders plan their exit, check whether they qualify for BADR, and work out what the April 2027 change means for them.

Find out more about our accountancy services, or get in touch for a free consultation.