Business Asset Disposal Relief 2026: Selling After 5 April Will Cost You More
If you’re thinking about selling your business, winding down your limited company, or disposing of shares this year, the clock is ticking. Business Asset Disposal Relief (BADR) rises from 14% to 18% on 6 April 2026, and on a £1 million qualifying gain, that’s an extra £40,000 in tax.
That’s not a rounding error. It’s a genuine, avoidable cost that comes down to one thing: timing. Whether you’re a contractor with a personal service company you’ve been meaning to close, a director negotiating a sale, or a couple who’ve built a business together over decades, the same deadline applies.
And it’s now less than six weeks away.
| 18% BADR rate from 6 April 2026 (up from 14%) |
£40,000 Extra tax on a £1 million qualifying gain |
39,000 BADR claimants in 2023-24 (HMRC) |
£1m Lifetime BADR limit per individual |
BADR Rate 2026: The Headline Numbers
- BADR rate from 6 April 2026: 18% (up from 14% in 2025-26, and 10% before April 2025)
- Extra tax on a £1 million qualifying gain: £40,000
- Lifetime limit: £1 million per individual (£2 million for a married couple or civil partners)
- BADR claimants in 2023-24: 39,000, claiming relief on £10.3 billion in gains
- Basic-rate taxpayers from April 2026: zero saving from BADR (the 18% BADR rate matches the standard lower CGT rate)
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Current Rate: 2025-26 14% Available on disposals completed on or before 5 April 2026 |
→ |
New Rate: 2026-27 Onwards 18% Applies to all disposals completed on or after 6 April 2026 |
Here’s the detail most articles skip over: from 6 April 2026, BADR won’t save basic-rate taxpayers a single penny. The standard lower CGT rate is already 18%, and the BADR rate will be 18%. They’re identical. The relief will only benefit higher-rate and additional-rate taxpayers, saving them 6 percentage points compared to the 24% standard higher rate. On a £1 million gain, that’s still a £60,000 saving, so it’s absolutely still worth claiming if you’re a higher-rate taxpayer. But the days of BADR offering a meaningful discount for everyone are over.
How BADR Has Changed: The Rate Progression
To understand where we are, you need to see how quickly this relief has been eroded. For 17 years, from its introduction in 2008 right through to April 2025, BADR (originally called Entrepreneurs’ Relief) sat at a flat 10%. The Autumn Budget 2024 changed everything.
| Period | BADR Rate | Lifetime Limit | Key Change |
|---|---|---|---|
| 6 April 2008 to 5 April 2025 | 10% | £1m (reduced from £10m in March 2020) | Baseline rate for 17 years |
| 6 April 2025 to 5 April 2026 | 14% | £1m | First rate increase since BADR was introduced |
| 6 April 2026 onwards | 18% | £1m | BADR rate now equals standard lower CGT rate |
| 6 April 2008 |
BADR (Entrepreneurs’ Relief) introduced at 10% Lifetime limit of £1 million. Rate held at 10% for 17 years. |
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| 11 March 2020 |
Lifetime limit cut from £10 million to £1 million Budget 2020. Rate remained at 10%. Relief renamed BADR in April 2020. |
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| 6 April 2025 |
BADR rate rises to 14% First rate increase since the relief was introduced. Announced at Autumn Budget 2024. |
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| 5 April 2026 |
Last day to complete a disposal at 14% Completion (not exchange) must occur on or before this date for the 14% rate to apply. |
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| 6 April 2026 |
BADR rate rises to 18% BADR rate now equals the standard lower CGT rate. Basic-rate taxpayers gain no benefit from BADR. |
The government’s stated rationale was to “raise revenue, while ensuring that the UK tax system remains internationally competitive.” The phased approach was supposed to give business owners “time to adjust.” In practice, the Treasury’s own data shows that business owners didn’t adjust. They accelerated disposals. The estimated cost of BADR to the Exchequer surged 209% over five years, reaching an estimated £3.4 billion in 2024-25, largely because taxpayers brought forward eligible disposals in anticipation of rate rises. The government created the very rush it said it wanted to avoid.
Let me be blunt: a relief that was designed to reward entrepreneurship and encourage business creation has been quietly hollowed out. The lifetime limit was slashed from £10 million to £1 million in 2020. The rate has nearly doubled in two years. And from April 2026, a basic-rate taxpayer selling their business gets absolutely no benefit from BADR compared to standard CGT. That’s a significant shift in policy, whatever the government chooses to call it. For the full picture of the policy changes hitting small businesses this year, we’ve written about it separately.
What the BADR Rate Rise Actually Costs You
Here’s where the comparison tables tell the real story. The table below shows the tax you’d pay on qualifying gains at different levels, comparing the current 14% rate (available until 5 April 2026) with the 18% rate that applies from 6 April 2026. All figures assume the gain is within your £1 million lifetime BADR limit and the £3,000 annual exempt amount has been deducted.
| Qualifying Gain | Net Taxable Gain (after £3,000 AEA) | Tax at 14% (2025-26) | Tax at 18% (2026-27) | Extra Cost After April 2026 |
|---|---|---|---|---|
| £100,000 | £97,000 | £13,580 | £17,460 | £3,880 |
| £250,000 | £247,000 | £34,580 | £44,460 | £9,880 |
| £500,000 | £497,000 | £69,580 | £89,460 | £19,880 |
| £750,000 | £747,000 | £104,580 | £134,460 | £29,880 |
| £1,000,000 | £997,000 | £139,580 | £179,460 | £39,880 |
Look at the bottom row. On a £1 million gain, the difference is nearly £40,000. That’s not a hypothetical number. We see gains at this level regularly from business owners who’ve spent 15, 20, or 25 years building something. The gain reflects decades of work, and the rate at which it’s taxed comes down to which side of a single date the disposal falls on.
Extra Tax Cost After 6 April 2026 (BADR 14% vs 18%)
After deducting the £3,000 annual exempt amount. Higher-rate taxpayers qualifying in full for BADR.
| £100,000 gain |
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| £250,000 gain |
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| £500,000 gain |
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| £750,000 gain |
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| £1,000,000 gain |
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Source: HMRC BADR guidance; GOV.UK CGT rates and allowances. Extra cost = 4% x net taxable gain (gain minus £3,000 AEA).
Even at the £250,000 level, which is close to the average BADR gain (£264,000 per claimant in 2023-24 based on HMRC data), the difference is almost £10,000. That’s real money.
BADR vs Standard CGT: Where the Saving Actually Sits
This table shows the relationship between BADR and standard CGT rates, and why the April 2026 change hits differently depending on your income tax band.
| Taxpayer Type | Standard CGT Rate | BADR Rate (2025-26) | BADR Rate (2026-27) | Saving vs Standard (2025-26) | Saving vs Standard (2026-27) |
|---|---|---|---|---|---|
| Basic-rate taxpayer | 18% | 14% | 18% | 4 percentage points | None |
| Higher/additional-rate taxpayer | 24% | 14% | 18% | 10 percentage points | 6 percentage points |
| Maximum saving on £1m gain (higher-rate) | £100,000 | £60,000 |
The column that should worry you is the “2026-27” saving for basic-rate taxpayers. It’s zero. If your total taxable income (including the gain) keeps you within the basic-rate band, BADR from April 2026 gives you nothing you wouldn’t already get under standard CGT. For higher-rate taxpayers, the relief is still meaningful, saving up to £60,000 on a £1 million gain, but that’s a 40% reduction in the saving compared to 2025-26.
The BADR Timing Trap: Anti-Forestalling Rules
Here’s where people get caught out. You might think that exchanging contracts before 5 April 2026 locks in the 14% rate, even if the deal doesn’t complete until after that date. It doesn’t.
HMRC’s anti-forestalling rules are explicit: if you enter an unconditional contract during the 2025-26 tax year but complete the disposal on or after 6 April 2026, the 18% rate applies. Not 14%. The completion date is what counts, not the contract date.
⚠️ Anti-Forestalling: Exchange Is Not Enough
If you exchange contracts before 5 April 2026 but the deal completes on or after 6 April 2026, the 18% rate applies — not 14%. The completion date determines your rate, not the date you sign. For an MVL, the date of the capital distribution to you is what counts, not the date you appoint the liquidator. Both must fall on or before 5 April 2026 for the lower rate to apply.
There’s a narrow exclusion. If you can demonstrate that the contract wasn’t entered into with a purpose of obtaining a tax advantage from the timing, the anti-forestalling rule may not apply. For connected parties (selling to a family member or associated company, for example), there’s an additional test: the contract must have been entered into wholly for commercial reasons. And there’s a £100,000 de minimis threshold: if the total gains across all affected contracts don’t exceed £100,000, the anti-forestalling rule doesn’t apply.
But the practical message is simple: don’t rely on exchanging before the deadline if completion might slip into the new tax year. Get the deal done. Completed. Before 5 April 2026. Not “nearly done.” Not “contracts exchanged.” Done.
MVL and BADR: How PSC Wind-Downs Work Before 5 April
If you’re winding down a personal service company through a Members’ Voluntary Liquidation (MVL), the same timing principle applies, but the date that matters is different. For an MVL, the rate is determined by the date of the capital distribution, not the date you appointed the liquidator.
This catches people out every year. You can’t start an MVL in late March 2026 and assume the 14% rate will apply. The liquidator needs to make the actual distribution to you before 5 April 2026. A straightforward MVL typically takes several weeks from the appointment of the liquidator to the first distribution, though your insolvency practitioner will give you a firm timeline for your specific situation. That means if you haven’t already started the process, the window is extremely tight.
The £25,000 threshold is also worth understanding. If your total distributions during a winding up are £25,000 or less, you can achieve capital treatment without a formal MVL. Above £25,000, you need the formal liquidation route. For most contractors with accumulated profits well above that level, an MVL is the only path to capital gains treatment and BADR.
If you’re keeping your limited company open rather than winding it down, see our guide to the optimal director salary for 2026-27 under the new dividend tax rates.
Two Real-World Examples
An IT Contractor Closing a PSC After 15 Years
Real-World Example: One of our clients, a Norwich-based IT contractor who’s operated through his own limited company for 15 years, came to us with exactly this question. He’s accumulated £320,000 in retained profits. He’s been the sole director and sole shareholder throughout, so all BADR qualifying conditions are comfortably met. He’s a higher-rate taxpayer.
The question was straightforward: wind up before or after 5 April 2026?
Completing the MVL distribution by 5 April 2026 (14% rate):
- Total distribution: £320,000
- Less annual exempt amount: £3,000
- Taxable gain: £317,000
- BADR tax at 14%: £44,380
- Net retained after tax: £275,620
Completing the MVL distribution after 5 April 2026 (18% rate):
- Total distribution: £320,000
- Less annual exempt amount: £3,000
- Taxable gain: £317,000
- BADR tax at 18%: £57,060
- Net retained after tax: £262,940
The difference: £12,680 extra tax for waiting.
That’s £12,680 for missing a deadline by a matter of days. The right approach is to appoint a licensed insolvency practitioner immediately and ensure the distribution is made before 5 April 2026. For a straightforward MVL with cash assets only, this is achievable, but the timeline is tight. Anyone in this position who hasn’t started the process should be treating this as urgent.
A Husband-and-Wife Retail Business Selling After 25 Years
Real-World Example: We’ve recently been working with a couple who’ve run a gift and homeware shop for 25 years and are selling the business as a going concern. They’re both directors and equal shareholders (50% each). The buyer has offered a price that produces a combined capital gain of £800,000, split equally as £400,000 each. Both are higher-rate taxpayers, and neither has previously claimed BADR.
This is where the couple strategy matters. Each spouse has their own separate £1 million BADR lifetime limit. That means the full £800,000 gain qualifies for BADR without either of them coming close to their individual cap.
Each shareholder’s tax completing by 5 April 2026 (14% rate):
- Gain attributable: £400,000
- Less annual exempt amount: £3,000
- Taxable gain: £397,000
- BADR tax at 14%: £55,580
Each shareholder’s tax completing after 5 April 2026 (18% rate):
- Gain attributable: £400,000
- Less annual exempt amount: £3,000
- Taxable gain: £397,000
- BADR tax at 18%: £71,460
Difference per person: £15,880. Combined extra tax by waiting: £31,760.
Nearly £32,000 more in tax, on the same sale, for the same business, because the deal completed a week too late. The right professional approach includes verifying the qualifying conditions (2-year officer/employee test, 5% shareholding, trading company status), coordinating with the buyer’s solicitor to ensure the unconditional contract is exchanged and completed within the same tax year, and flagging the anti-forestalling risk if there’s any chance of the deal slipping past 5 April.
That’s the kind of detailed timing work your accountant should be doing alongside your solicitor. It’s not just about running the numbers. It’s about making sure the deal structure doesn’t accidentally cost you five figures.
Business Asset Disposal Relief Planning: What You Can Still Do
None of this means you’re helpless. The businesses and individuals we work with who handle these changes well have a few things in common: they plan early, they take professional advice, and they don’t let a deadline pass without understanding exactly what it costs them.
The Couple Strategy
If you and your spouse or civil partner both hold shares in the business, each of you has a separate £1 million BADR lifetime limit. On a jointly held business with a combined gain of up to £2 million, both gains can qualify for BADR in full. This isn’t a loophole. It’s built into the legislation. But it only works if the shareholding structure is correct and both parties meet the qualifying conditions (5% shareholding, 2-year officer/employee test, trading company status).
If your spouse holds shares but isn’t a director or employee, that’s a problem. If they hold 3% instead of 5%, that’s a problem. These details matter, and they need to be checked well before you’re in a solicitor’s office exchanging contracts.
BADR Is Still Worth Claiming After April 2026
Even at 18%, BADR saves a higher-rate taxpayer 6 percentage points compared to the 24% standard rate. On a £1 million gain, that’s still £60,000. Don’t fall into the trap of thinking BADR becomes worthless from April 2026. It doesn’t. It becomes less generous, and it stops helping basic-rate taxpayers entirely, but for higher-rate taxpayers it remains a significant relief.
The practical implication? If you can’t complete your disposal before 5 April 2026, don’t panic. The relief is still available at 18%, and you should absolutely still claim it if you’re a higher-rate taxpayer. But if you can get the deal done before the deadline, the 4 percentage point difference is worth fighting for.
Multiple Claims Are Permitted
There’s no limit to how many times you can claim BADR, provided your cumulative qualifying gains don’t exceed the £1 million lifetime limit. If you sold a previous business and claimed £200,000 in BADR qualifying gains, you still have £800,000 of your lifetime limit remaining. Your accountant should be tracking this for you. If they’re not, that’s a conversation worth having.
Review Whether You Actually Qualify
The qualifying conditions for BADR on shares in a personal company are stricter than many people realise. You need to meet all three tests throughout a continuous 2-year period ending on the date of disposal:
- Personal company test: You hold at least 5% of the ordinary share capital, at least 5% of the voting rights, and at least 5% of either profits available for distribution or distributable assets on a winding up
- Trading company test: The company must be a trading company (non-trading activities can’t be more than a minor proportion)
- Officer or employee test: You must be a director or employee of the company throughout the qualifying period
The 5% distribution rights test was only added from 29 October 2018. If you restructured your shares before that date and haven’t checked your eligibility since, there may be a gap. Similarly, if your company holds investment property alongside its trading activities, the “trading company” test may not be as clear-cut as you assume. HMRC looks at this broadly, considering turnover, assets, expenses, and management time. A company that’s broadly 80% trading and 20% investment is on the edge, though HMRC doesn’t set a fixed percentage threshold: they consider all relevant factors.
How to Claim BADR Before the Deadline: Six Action Steps
- If you’re selling and the deal is in progress, target completion before 5 April 2026. Work with your solicitor and your accountant to ensure that the unconditional contract is exchanged and completed before the deadline. Remember: the anti-forestalling rules mean exchange alone isn’t enough. Completion must happen by 5 April 2026 for the 14% rate to apply.
- If you’re winding down a PSC via MVL, act immediately. The distribution date determines your rate, not the date you appoint a liquidator. A straightforward MVL takes several weeks. If you haven’t started the process, contact a licensed insolvency practitioner this week. Every day you delay narrows the window.
- If you’re a couple selling a jointly owned business, verify both spouses meet the qualifying conditions now. Each person needs 5% of ordinary shares, 5% of voting rights, 5% of distribution rights, and 2 years as an officer or employee. If one spouse falls short on any condition, fix it now or understand the tax consequence before you proceed.
- Check your remaining BADR lifetime limit. If you’ve claimed BADR on a previous disposal, the lifetime limit is cumulative. You can check your previous claims on earlier Self Assessment returns or by reviewing your records with your accountant.
- If you can’t complete before April 2026, don’t assume BADR isn’t worth claiming. At 18%, it still saves a higher-rate taxpayer up to £60,000 on a £1 million gain. Claim it on your Self Assessment return. The deadline for 2025-26 disposals is 31 January 2028, and for 2026-27 disposals, it’ll be 31 January 2029. BADR isn’t applied automatically. You have to claim it, and missing the deadline means losing the relief entirely.
- Book a meeting with your accountant before the end of March. If any of the above applies to you, this is a conversation that needs to happen now, not in the summer. The figures in this article are based on general assumptions. Your specific situation, including your income, your gain, your shareholding structure, your company’s trading status, and your remaining lifetime limit, will produce different numbers. The only way to know your actual position is to run the calculations with someone who understands your full picture.
Get the Timing Right
The difference between completing a disposal on 5 April 2026 and completing it on 6 April 2026 could be tens of thousands of pounds. That’s not hyperbole. You’ve seen the tables. A £500,000 gain costs nearly £20,000 more after the deadline. A £1 million gain costs nearly £40,000 more.
This isn’t a tax relief that’s being removed. It’s being made less generous, in a way that particularly hits basic-rate taxpayers who’ll get no benefit from it at all from April 2026 onwards. For higher-rate taxpayers, BADR remains valuable, but the window to lock in the 14% rate is closing fast.
If you’re anywhere in the process of selling, winding down, or disposing of shares in a qualifying business, the single most important thing you can do right now is get professional advice on your specific numbers and your specific timeline.
Have questions about how the BADR rate change affects your business? Find out more about our accounting services or Get in Touch and we’ll help you work through the figures for your situation.
This article provides general guidance based on legislation and practice as at March 2026. Tax and employment law are complex and fact-specific. The information here should not be relied upon as advice for your particular circumstances. Please consult a qualified accountant or professional advisor for guidance tailored to your situation.
