Business Asset Disposal Relief: What Business Owners Need to Know for 2027.

What is Business Asset Disposal Relief?

Business Asset Disposal Relief (BADR) is a Capital Gains Tax relief that reduces the rate paid on qualifying gains when an individual disposes of all or part of a business, including shares in a personal trading company. It was known until 2020 as Entrepreneurs' Relief, and many owners still use the older name. The relief matters to shareholders selling their companies because the tax is charged on the chargeable gain — broadly, the sale proceeds attributable to the shares less what they cost and certain allowable costs — not on the headline sale price. Two owners who sell for the same price can therefore face very different tax outcomes, and the relief applies to the gain, within a lifetime limit, rather than to the proceeds.

As at 1 November 2026, qualifying gains are taxed at 18% and the lifetime limit on qualifying gains is £1 million per individual. The relief is claimed through the individual's tax return, and eligibility is a question of personal tax law rather than something a sale adviser can determine.

What changed in the October 2026 Budget?

The October 2026 Budget announced that the BADR lifetime limit will fall from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. The 18% preferential rate itself is not changing in April 2027. The change is subject to legislation in Finance Bill 2026–27.

The significance is greatest for individuals whose qualifying gains exceed £500,000 and who still have unused BADR lifetime entitlement. Gains above the new limit would be taxed at the normal Capital Gains Tax rates instead of 18%. Owners who have already used their lifetime allowance in full are unaffected by the reduction, because they have no remaining entitlement either way.

Who qualifies for Business Asset Disposal Relief?

For a disposal of shares in a company, the usual conditions are that throughout a qualifying period of normally two years up to the disposal the company was the individual's personal company — broadly meaning the individual held at least 5% of the ordinary share capital and voting rights, together with the relevant economic entitlement tests — the company was a trading company or the holding company of a trading group, and the individual was an employee or office-holder of the company. Previous BADR claims reduce the remaining lifetime headroom.

Owning 5% of a company does not by itself establish eligibility: all of the conditions must be met for the required period, and separate rules exist for EMI shares, sole traders, partners in a partnership, trustees and associated disposals. Whether a particular shareholder qualifies is a question for their accountant or specialist tax adviser, applying the rules to their own facts.

How much more tax could a seller pay?

The illustration below shows the effect of the proposed limit reduction for a shareholder with £1 million of qualifying gains and no previous BADR usage. It assumes the gains above the relieved amount are taxed at the 24% higher Capital Gains Tax rate, ignores the annual exempt amount and any other reliefs, and assumes the proposals are enacted as announced.

This is an illustration, not a calculation of any individual's liability. The actual outcome depends on the person's other gains and income, previous claims, the annual exemption, the rate that applies to non-relieved gains in the year of disposal and the final legislation. Personal tax computations belong with a qualified tax adviser.

Should I sell my business before April 2027?

The announced change is a legitimate reason to review transaction timing, but it is not a reason to rush a sale. A successful sale needs proper preparation, an achievable price, a credible buyer and suitable terms, and a hurried process can cost more value than the tax saving preserves. The right question is usually whether a sale was already under consideration for commercial or personal reasons; if it was, the April 2027 date is worth factoring into the timetable.

The Government has announced anti-forestalling rules applying to certain contracts and share arrangements, so signing Heads of Terms — or even entering into an unconditional contract — before 6 April 2027 does not automatically protect the existing allowance. Heads of Terms are in any event an agreement to negotiate, not the point at which tax treatment is fixed. Anyone weighing timing should take advice from their accountant or tax adviser on how the rules apply to their own arrangements before committing to a course of action.

Selling a business to retire

For owners whose sale is driven by retirement, the BADR change sits inside a much wider set of decisions. The commercial work matters at least as much as the tax position: establishing what the business is realistically worth in the market, assessing likely net proceeds rather than the headline consideration, preparing financial information that will stand up to a buyer's examination, and reducing the business's dependence on the retiring owner so that value transfers with the company rather than leaving with the individual.

Identifying suitable strategic trade acquirers takes time, and so does the negotiation and handover that follow. Allowing enough runway for buyer research, a managed approach and a considered handover period usually protects both price and certainty. The tax and transaction structure should be worked through with the owner's accountant and solicitors alongside the commercial process, not after it. The practical side of this is covered in the guide to selling a business for retirement.

What if a sale will not happen until 2027 or 2028?

Early planning retains its value whatever happens to the relief. Owners who prepare before a sale becomes urgent — tidying financial information, documenting contracts, building a management layer, understanding what buyers in their sector pay for — tend to have more options and stronger negotiating positions than those who begin when they need to finish. Whether or not an owner qualifies for BADR, the commercial readiness of the business and the quality of the buyer usually influence the outcome more than the tax rate on the gain.

What is the difference between BADR and Founders' Relief?

The October 2026 Budget also announced a separate proposed Founders' Relief. The two schemes are aimed at different sellers and should not be confused.

The proposed £10 million Founders' Relief lifetime limit would be reduced by BADR and Investors' Relief claims made from 6 April 2027, so the interaction between claims needs advice before either is used. The detail is set out in the companion guide to Founders' Relief.

How EXITS.co.uk can help

EXITS.co.uk advises on the commercial sale process, not on personal tax computations. The work covers discussing the owner's objectives and timing, considering whether the company is ready for sale, helping establish an appropriate valuation strategy, researching suitable potential trade acquirers, managing confidentiality and buyer qualification, negotiating price, structure and commercial terms, and coordinating with the owner's own tax and legal advisers so that the commercial and tax workstreams align.

If you are considering a sale in 2027 or 2028 and want to understand how the process would run for your business, you are welcome to discuss it confidentially or request a considered view of value. Nothing is marketed or disclosed without your instruction.

Common questions about Business Asset Disposal Relief

What is the BADR rate in November 2026?

18% on qualifying gains, subject to a £1 million lifetime limit per individual. From 6 April 2027 the limit is proposed to fall to £500,000; the 18% rate itself is unchanged under the Budget proposals.

Does signing Heads of Terms protect the current allowance?

Not automatically. Heads of Terms record the outline of a proposed deal and are generally not binding on the sale itself, and the announced anti-forestalling rules mean that even certain contracts entered into before 6 April 2027 may not secure the existing £1 million limit. The tax treatment of any particular arrangement needs confirmation from a specialist tax adviser before it is relied on.

Can BADR apply to a partial share sale?

BADR can apply to a disposal of part of a shareholding where the qualifying conditions are met, and the relief applies to the gain on the shares actually disposed of, within the individual's remaining lifetime limit. How a partial disposal interacts with the conditions — and with any later disposal of the retained shares — depends on the structure and should be confirmed with a tax adviser.

What happens if I have claimed BADR previously?

Earlier claims use up part of the lifetime limit. The relief available on a new disposal is limited to the unused balance, so an owner who has already claimed on £1 million of gains has no remaining entitlement, while someone who claimed on £300,000 would have £700,000 of headroom before April 2027 and £200,000 under the proposed new limit. HMRC's helpsheet HS275 explains how the lifetime limit is tracked.

This page is general information about the law and tax treatment of business sales in the United Kingdom as at 1 November 2026. It is not personal advice, and the treatment of any particular transaction depends on how the deal is structured, the shareholders' own circumstances, the status of the company, the legislation in force at completion and the interpretation of your own accountant and solicitor. Take advice on your own facts before acting.