Business Asset Disposal Relief Halved to £500,000: What It Means

Mike Jackson FCCA

3 days ago

3 min read

One of the quieter announcements in the Autumn Budget on 28 October 2026 matters a great deal to anyone planning to sell, pass on or close their business. The lifetime limit for Business Asset Disposal Relief (BADR) will fall from £1 million to £500,000 from 6 April 2027.

Here's what that means in practice, who it affects and what's worth checking now.

What is Business Asset Disposal Relief?

BADR, previously called Entrepreneurs' Relief, reduces the Capital Gains Tax you pay when you sell or give away all or part of a qualifying business. That includes selling shares in your trading company, closing a company through a members' voluntary liquidation, or selling a sole trade or partnership business.

The relief has a lifetime limit, and every BADR or Entrepreneurs' Relief claim you've made in the past counts towards it.

What has changed

Lifetime limit: £1 million today, falling to £500,000 for qualifying disposals from 6 April 2027.
BADR rate: 18% (it rose from 14% on 6 April 2026).
Gains above the limit: taxed at the main Capital Gains Tax rates of 18% (within any unused basic rate band) or 24%.
Before the change: qualifying disposals made before 6 April 2027 still get the £1 million limit, subject to the final legislation.

The government says three-quarters of people who claim BADR will still get relief on their whole gain, so for many owner-managers whose gain is under £500,000, nothing changes.

What it could cost

Because the BADR rate is now 18% and the higher main rate is 24%, the relief is worth up to 6p for every £1 of gain inside the limit. Halving the limit therefore halves the maximum saving, from £60,000 to £30,000.

Take a higher-rate taxpayer with no previous claims who sells their company shares for a £1 million gain:

Sold before 6 April 2027: £1,000,000 at 18% = £180,000.
Sold on or after 6 April 2027: £500,000 at 18% (£90,000) plus £500,000 at 24% (£120,000) = £210,000.
The difference: £30,000 more tax.

If you've already used some of your lifetime limit, for example on an earlier business sale, the amount left could be smaller than you expect.

What about the new Founders' Relief?

The Budget also proposed a new Founders' Relief: a 10% Capital Gains Tax rate on up to £10 million of lifetime gains, intended to apply from April 2027. It's aimed at founders of fast-growing companies and the proposed conditions are demanding. Among other things, they include holding at least 25% of the shares from the start of trading, turnover of at least £10 million and at least 15 full-time employees, plus strong growth or significant R&D spending.

The consultation closes on 30 November 2026, so the detail could still change. Most owner-managed businesses are unlikely to qualify, and BADR claims are expected to reduce how much Founders' Relief is available.

What to check now if you're thinking of selling or closing

How much of your limit is left. Look back at any previous BADR or Entrepreneurs' Relief claims.
Whether you still meet the conditions. For company shares you normally need at least 5% of the shares and voting rights (plus a 5% economic interest), and to be an officer or employee, for at least two years before the sale.
Your likely gain. A rough valuation now tells you whether the new limit affects you at all.
Timing. If a sale or members' voluntary liquidation is already planned, it may be worth looking at whether it can complete before 6 April 2027. Deals agreed before that date but completed afterwards may be caught by anti-forestalling rules in the Finance Bill, so take advice before relying on a contract date.
Don't let tax drive the deal. A saving of up to £30,000 matters, but it's rarely worth accepting a lower price or rushed terms just to beat the deadline.

Capital Gains Tax on a disposal in the 2026/27 tax year is normally reported through Self Assessment and due by 31 January 2028. Jackson Lee Accountants works with company directors across Bury and Greater Manchester on exit planning alongside their limited company accounts, so the figures are joined up before any decision is made.

Source: HM Treasury, Budget 2026 document, 28 October 2026.

Need a hand with this? We're accountants in Bury, and our capital gains tax reporting service covers it for a fixed fee.

Talk it through with us

If you're thinking about selling or closing your business, book a free, no-obligation 30-minute chat by phone, Teams or at our Bury office, or see your fixed fee online in 2 minutes. Prefer to talk now? Call 0161 327 0047.