Clock is ticking for business owners planning an exit

From 6 April 2026, the tax landscape for disposals qualifying for Business Asset Disposal Relief (BADR) will change significantly. While the lifetime limit remains at £1 million, the rate applied to qualifying disposals will rise to 18%, up from 14% (introduced in April 2025) and 10% previously. This shift narrows the gap between BADR and standard Capital Gains Tax (CGT) rates, making timing and planning more critical than ever.

For years, BADR has been a cornerstone of tax-efficient business disposals, offering entrepreneurs a reduced CGT rate on qualifying gains. The upcoming increase means that selling after April 2026 could cost substantially more. For example, a £1 million gain taxed at 14% today would incur £140,000 in tax. From April 2026, that same gain would attract £180,000 - a difference of £40,000. By comparison, the standard CGT rate for higher-rate taxpayers is 24%, so while BADR still offers savings, the advantage is shrinking.

Owners of trading businesses, contractors winding down companies, and those planning management buyouts or family transfers will all be affected. The relief still offers a benefit compared to full CGT rates, but the advantage is shrinking. This makes early action essential for anyone considering a sale in the next few years.

The transitional period creates a clear incentive to act sooner rather than later. Completing a disposal before April 2026 locks in the 14% rate; beyond that,18% applies. Anti-forestalling rules mean that simply signing a contract early won’t guarantee the lower rate if completion happens later, so careful structuring is vital.

Business owners should start by reviewing their exit strategy now. Confirming eligibility for BADR - such as meeting the two-year ownership and employment conditions - is critical. It’s also worth modelling the tax exposure to understand the financial impact.

For some, accelerating a sale or restructuring the deal could deliver significant savings. Others may want to explore alternative routes, such as family succession, Employee Ownership Trusts (although also facing tax changes from next year), or phased disposals, each with its own tax implications.

The changes to BADR don’t eliminate the relief, but they do reduce its value. For entrepreneurs who have built their businesses with an eye on a tax-efficient exit, the next few months represent a crucial window of opportunity. Acting now could mean the difference between a manageable tax bill and one that’s too costly.

If you’re planning a disposal or want to explore your options before the BADR changes take effect, get in touch with our specialist private client tax team via the form below.