Budget 2026|Selling your business
BADR cut to £500,000: what it means if you're selling your business
From 6 April 2027, Business Asset Disposal Relief only covers the first £500,000 of your lifetime gains, down from £1 million. The 18% rate stays the same.
By Simon Jacobs
Chartered Tax Adviser (CTA · ACA), SRJ International ·
Simon is a Chartered Tax Adviser (CTA · ACA) and PwC trained, founder of SRJ International. He advises UK business owners on tax, profit extraction and exit. Read his full profile →
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What changed
HM Treasury's Budget 2026 overview says the government will reduce “the lifetime limit of how much Business Asset Disposal Relief (BADR) an individual can claim from £1,000,000 to £500,000 for BADR qualifying disposals made on or after 6 April 2027.” Contracts entered into before that date that haven't completed get special provisions.
Source: HM Treasury, Budget 2026 overview of tax legislation and rates, section 1.33
Who it affects
- Owners expecting a gain of more than £500,000 when they sell their company or business.
- Anyone who has already claimed BADR, because earlier claims count towards the lifetime limit.
- Owners who planned a sale after April 2027 on the assumption the full £1 million would be available.
What it costs: a worked example
Take an owner selling shares in their company for a £1,000,000 gain, with no BADR used before and paying higher rate tax.
| Sale before 6 April 2027 | Sale on or after 6 April 2027 | |
|---|---|---|
| BADR lifetime limit | £1,000,000 | £500,000 |
| Tax on the first £500,000 at 18% | £90,000 | £90,000 |
| Tax on the next £500,000 | £90,000 (18%) | £120,000 (24%) |
| Total tax on a £1m gain | £180,000 | £210,000 |
That's £30,000 more tax on the same sale. The example leaves out the annual exempt amount and assumes the whole gain qualifies for BADR. Your own numbers will differ.
Where Founders' Relief fits
The Budget also announced a new Founders' Relief for founders and early investors in high-growth, innovative companies, for qualifying disposals from 6 April 2027. It was announced as a 10% rate on up to £10 million of lifetime gains. The government has opened a technical consultation on the detail, so who qualifies isn't settled yet. Most owner-managed businesses should plan on BADR, not Founders' Relief.
Your questions answered
When does the BADR cut to £500,000 take effect?
For BADR qualifying disposals made on or after 6 April 2027. Disposals before that date still fall under the £1,000,000 lifetime limit. HM Treasury says special provisions apply to contracts entered into before 6 April 2027 that have not completed by then.
Does the BADR rate change?
No. Gains within the lifetime limit are still taxed at 18%. What changes is how much of your gain can use that rate. Gains above the limit are taxed at the main Capital Gains Tax rate, 24% for higher and additional rate taxpayers.
Do earlier BADR claims count towards the new limit?
Yes. It is a lifetime limit, so any BADR you have already claimed counts against the £500,000. If you have already used £500,000 or more, there is no BADR left for disposals from 6 April 2027.
Is Founders' Relief a replacement for BADR?
No. Founders' Relief is a separate new Capital Gains Tax relief for founders and early investors in high-growth, innovative companies, for qualifying disposals from 6 April 2027. It was announced as a 10% rate on up to £10m of lifetime gains, and its detailed conditions are out for technical consultation, so most owner-managed businesses should not plan around it yet.
Should I sell before 6 April 2027?
It depends on the size of your gain, how much BADR you have already used, and whether a sale is realistic in that time. Rushing a sale for the tax alone can cost more than it saves. Speak to a Chartered Tax Adviser about your own numbers before you change your plans.
Read everything else that changed in Budget 2026: key points at a glance for business owners.
General information, not personal tax advice. The legislation is still to be published and the detail can change.
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