Selling your company: BADR limit set to halve in April

From 6 April 2027, Business Asset Disposal Relief is set to cover only the first £500,000 of qualifying gains in your lifetime, half of today's £1 million. The rate on gains within the limit stays at 18 per cent. Above it, gains are taxed at the normal Capital Gains Tax rates, which means 24 per cent for a higher rate taxpayer. The Budget on 28 October announced the cut, and it is due in the Finance Bill 2026-27, so it is not yet law.

Who it reaches

The relief applies when you sell all or part of your business, or shares in your own trading company, and meet the conditions. The limit is for your whole lifetime, so relief you have claimed on earlier sales counts against it. HMRC's note on the change says three quarters of people who claim the relief will still get it on their whole gain. The change bites for the rest: owners whose qualifying gains run past £500,000, on the part above the limit.

What it costs on an £800,000 gain

Illustration, not a real client. Ravi owns a design agency in Islington and sells his shares for a gain of £800,000. He meets the conditions for the relief, has never claimed it before and is a higher rate taxpayer.

• Sold before 6 April 2027: after the £3,000 annual exempt amount, £797,000 is taxed at 18 per cent. Tax: £143,460.

• Sold on or after 6 April 2027, if the change passes: £500,000 at 18 per cent is £90,000. The remaining £297,000 is taxed at 24 per cent, which is £71,280. Tax: £161,280.

The difference is £17,820: the six-point gap between 18 and 24 per cent, charged on £297,000. If you have never claimed the relief and your gain is £500,000 or less, the change costs nothing.

Signing early does not settle it

For Capital Gains Tax, an unconditional sale normally happens when the contract is made, even if it completes later. The proposed law has rules for deals signed before 6 April 2027 that complete afterwards. The £500,000 limit would apply to them unless the parties can show they did not sign to gain from that timing rule or, where buyer and seller are connected, that the deal was wholly commercial. Anyone relying on that must also make a statement where the gain is over £100,000. Similar rules would cover some share reorganisations.

The new Founders' Relief

The Budget also announced a Founders' Relief from 6 April 2027: a 10 per cent rate on up to £10 million of lifetime gains for founders and early investors who have made a significant long-term contribution to high-growth, innovative companies. It is out for consultation until 30 November 2026 and is aimed at a narrow group, so most owners of established small companies should not plan around it until the rules are published. Any Business Asset Disposal Relief claimed from April 2027 would reduce the Founders' Relief limit.

What to do now

If a sale with a gain above £500,000 is already being discussed, the timetable matters more than it did. Get the gain worked out, check what relief you have claimed before, and take advice before you sign anything. Our Capital Gains Tax calculator gives a starting figure. The sale still has to be right for the business first: rushing a deal to beat a date can cost more than £17,820.

About the author

Harvey Dhillon is Founder and CEO of Zmartly, an accountancy firm for small businesses. He grew up in West London and began his career in finance at Barclays, in investment banking and wealth management, before going full-time on Zmartly in 2020.

Featured photo by Ron Lach on Pexels.