Business Asset Disposal Relief: What Changes in April 2027?

What is Business Asset Disposal Relief?

BADR is a relief that reduces the Capital Gains Tax rate on qualifying business disposals, within an individual’s remaining lifetime limit. Previously called Entrepreneurs’ Relief, it can be relevant when an owner sells eligible company shares, sells a qualifying business or disposes of certain associated assets.

The relief applies to a gain, not the whole sale price. Broadly, a gain reflects what you receive less allowable acquisition costs and other permitted deductions; your adviser must calculate the actual chargeable amount. Company valuation is different again: enterprise value, debt, cash, working-capital adjustments and your shareholding can all affect the proceeds that reach you.

An attractive offer does not establish eligibility. The seller, company, shares and qualifying period must be examined. Start with HMRC’s BADR guidance and take advice on your own position.

What changed in Budget 2026?

The announced change halves the lifetime qualifying-gains limit from £1 million to £500,000 for qualifying disposals from 6 April 2027. The 18% BADR rate is not increasing under this announcement.

This is a lifetime limit per individual, not a fresh allowance for each company or sale. The HMRC impact note published on 29 October 2026 states that past qualifying gains are taken into account. Someone who has already used the relevant allowance may have little or no headroom left.

Who qualifies for BADR on company shares?

For normal non-EMI shares, BADR requires more than owning 5%: the seller’s role, the company’s trading status, voting rights and economic entitlement normally need to meet the conditions throughout the two years before disposal.

• You are an employee or office holder of the company or a company in the same group.
• The company is a trading company or holding company of a trading group; substantial non-trading activities can matter.
• Your personal company normally gives you at least 5% of ordinary share capital and at least 5% of voting rights.
• You meet a relevant economic-entitlement alternative: at least 5% of distributable profits and assets on winding up, or at least 5% of disposal proceeds if the company were sold.
• The relevant conditions normally apply throughout the two-year qualifying period. Share classes, changing rights and arrangements around a transaction need individual assessment.

These are a practical summary, not a complete eligibility checklist. HMRC’s eligibility guidance and HS275 explain different provisions for EMI shares, sole traders, partnerships, business cessations, trustees, associated disposals and certain dilution circumstances. The 2026 helpsheet relates to the 2025–26 tax year, so do not use its historic rate as today’s rate.

Previous BADR and relevant Entrepreneurs’ Relief claims reduce remaining lifetime headroom. A spouse, co-founder or other shareholder has their own circumstances; one person’s qualification does not establish another’s.

BADR does not require £5m or £50m turnover. We typically advise established UK businesses with annual turnover of approximately £5m–£50m, but this is our advisory client profile, not a tax qualification test or a hard minimum for a conversation.

How much tax could the limit reduction cost?

In the following illustration, the reduction adds £30,000 to the tax on a £1 million gain. That result depends on the stated assumptions; it is not a tax quotation or a forecast for your sale.

A £1m sale price does not mean a £1m gain. Nor should a £30,000 illustrative difference outweigh a weaker buyer, uncertain deferred payments or an avoidable reduction in sale value. Ask your tax adviser to model the actual transaction before comparing dates.

Can BADR apply when selling only part of a company?

A qualifying disposal of part of an existing shareholding can potentially benefit from BADR. You do not necessarily have to sell every share, but the qualifying conditions and available lifetime headroom still apply.

A minority stake sale can release some personal capital while you retain a larger interest. A majority stake sale can transfer control while leaving you with minority equity. The percentage sold is only part of the decision: board rights, reserved matters, information rights and future funding arrangements shape what retaining shares actually means.

Existing shares versus a new share issue

Selling shares you already own is a secondary disposal: proceeds go to you and may create a personal gain. When the company issues new shares, subscription money goes into the company; that issue alone is not you disposing of your shares. A mixed transaction may provide both personal liquidity and growth capital, with separate pricing and tax questions.

The shares you keep need their own plan

Retained shares remain exposed to both future growth and downside. Dilution or changed employment, voting and economic rights can affect later qualification. A second disposal is assessed under the rules then in force and the lifetime headroom remaining; BADR is not automatically renewed for a two-stage exit.

Deferred consideration, earn-outs and rollover equity do not all follow the same tax treatment. Your accountant and solicitor should consider valuation of rights, disposal timing and the detailed documents before terms are committed. Our partial business sale guide explains the commercial structures; it does not replace that specialist advice.

Should owners consider a sale before April 2027?

Owners with qualifying gains and unused lifetime headroom above £500,000 may have a reason to review timing, but a business sale should remain a commercial decision rather than a race to a tax date.

Compare valuation, buyer quality, funding evidence, price certainty, deferred consideration, warranties, shareholder agreements and your personal objectives. A hurried negotiation can give away more value than an illustrative tax saving. A genuine buyer search and proper diligence also take time; we cannot promise completion before a particular date.

HMRC’s announced anti-forestalling provisions address certain unconditional contracts entered into before 6 April 2027 but completed later. The impact note describes conditions concerning tax-advantage purpose and wholly commercial reasons for connected-party contracts, together with a statement requirement in specified cases. Specialist interpretation is essential.

The note also describes special rules where an election disapplies share-reorganisation treatment for certain reorganisations or exchanges. Do not assume an early contract, Heads of Terms or a share exchange automatically preserves the £1m limit. This page does not prescribe a workaround; your tax adviser should review the applicable legislation and facts.

Planning to Sell in the Next 12–24 Months? Start the Conversation Now.

Even if you have no intention of selling immediately, an early conversation can help establish what your options might be and what preparation would improve your position.

Use the time to develop a saleable business and a realistic plan, not to assume waiting will create or preserve a tax entitlement. Preparation can cover:

• A realistic market valuation based on maintainable performance and the terms a credible buyer would offer.
• Management accounts, cash-flow reporting and supporting financial information that withstand questions.
• Confidential research into strategic trade acquirers whose capabilities and objectives fit your business.
• Full versus partial sale structures, personal capital needs and the founder’s future involvement.
• Shareholder agreements, share classes, consent requirements and arrangements affecting a later exit.
• Specialist tax and legal advice before choosing transaction structure, with adequate time for buyer search and negotiations.

For example, an owner considering a partial sale in 2028 might first clarify management responsibilities and the capital needed for growth. That commercial preparation remains worthwhile even if BADR headroom has already been used. Read our business-sale preparation guide for the wider work involved.

How does BADR differ from Founders’ Relief?

BADR is an existing relief with broader qualifying categories; Founders’ Relief is a separate proposal aimed at qualifying founders and significant early investors in high-growth, innovative UK companies.

Paragraph 2.4 of the Treasury consultation says amounts claimed under the BADR and Investors’ Relief lifetime limits from 6 April 2027 would reduce the proposed £10m Founders’ Relief headroom. Do not present the same gain as receiving both rates simultaneously.

Our separate Founders’ Relief eligibility and partial-sale planning guide covers those demanding proposed conditions. Ordinary SME status, turnover alone or a plan to grow does not establish qualification.

How Mergers.co.uk can help

We advise sellers on commercial transaction choices, not on certifying tax relief. Our confidential, sell-side-only approach starts with your objectives and a realistic assessment of the business.

1. Understand your intended timing, capital needs and preferred level of future involvement.
2. Consider full and partial sale alternatives, rather than force one structure.
3. Discuss readiness, market valuation and possible strategic acquirers.
4. Identify commercial matters for specialist tax and legal input before terms become fixed.
5. Develop a confidential buyer-search and transaction strategy where appropriate.

We identify prospective buyers through confidential, research-led approaches rather than simply publicly listing businesses. We represent the seller, not the incoming acquirer. Learn about our business-sale advisory approach and Mergers.co.uk and its team, led by Tony Vaughan. This does not imply tax-specialist qualifications.

Questions business owners ask

Official sources and review status

• HMRC: new BADR lifetime limit — published 29 October 2026
• HMRC: Business Asset Disposal Relief eligibility
• HMRC: HS275 Business Asset Disposal Relief 2026
• HM Treasury: Budget 2026
• HM Treasury: Budget 2026 tax legislation and rates
• HM Treasury: Founders’ Relief technical consultation

Last reviewed: 1 November 2026. Section 1.33 of the Budget tax-legislation overview places the BADR reduction in Finance Bill 2026–27. It remains an announced measure, not a change already in force. Review is required after Finance Bill provisions, Royal Assent, commencement guidance or changes to CGT rates and qualifying rules; this page does not automatically rewrite tax facts.

This is general information and commercial sale-planning guidance, not personalised tax or legal advice. Your accountant and solicitor should check your claims history, documents and the rules applicable to your transaction. Read the dated Budget 2026 commentary for the separate Founders’ Relief announcement.