Business Asset Disposal Relief and other Budget changes for entrepreneurs

Business Asset Disposal Relief and other Budget Changes for Entrepreneurs

Business owners considering a sale or exit could face important changes to Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR) from 6 April 2027.

Under the Budget measures announced by the government, the lifetime limit for BADR is set to fall from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027.

For anyone thinking about selling a business or qualifying shares, this makes early tax and exit planning increasingly important.

What is Business Asset Disposal Relief?

Business Asset Disposal Relief can reduce the amount of CGT payable when an individual makes a qualifying disposal of all or part of a business, or qualifying shares in a personal company.

The relief is subject to detailed eligibility conditions. Currently, an individual can claim BADR on up to £1 million of qualifying lifetime gains. Charlton Baker's existing guidance confirms that the lifetime limit is presently £1 million and that the BADR rate has been 18% since 6 April 2026.

Crucially, the lifetime allowance relates to an individual's qualifying gains, rather than the sale price or value of the business.

From 6 April 2027, the Budget proposal would reduce that lifetime limit to £500,000. That could leave a greater proportion of the gain on a business sale subject to the normal CGT rules.

Special provisions are also expected to apply to certain contracts entered into before 6 April 2027 and some share reorganisations and exchanges of securities.

New Founders' Relief

The government has also announced plans for a new Founders' Relief, aimed at founders and early investors who have made a significant, long-term contribution to growing innovative UK businesses.

Subject to the final legislation, the relief is intended to provide a 10% CGT rate on qualifying disposals of shares or securities from 6 April 2027.

The detailed rules will be important in determining exactly who qualifies. A consultation is expected to run until 30 November 2026, so founders and investors should avoid making plans on the assumption that they will qualify until the final rules are known.

Support for young entrepreneurs

The Budget also announced a pilot Young Entrepreneurs Allowance in England, designed to address one of the practical barriers facing young people who want to start their own business.

Successful applicants are expected to receive support towards living costs during the first year of their business.

Further details, including the eligibility requirements and application process, are still to come.

Planning to sell or grow a business?

Tax should rarely be the only factor determining when you sell a business, but understanding your likely CGT position well in advance can make a significant difference to your options.

If you're considering a business sale, succession or longer-term exit, our Business and Tax Advisory team can help you understand how the changing BADR rules could affect you and plan accordingly. That service specifically combines business decision-making, future planning and effective tax management.

Call our expert and friendly team now on 01380 723692 or email here.