Budget 2026: What the BADR and Founders' Relief Changes Mean When Selling a Business.

What did the Budget announce?

Two measures matter most to owners thinking about a sale. First, the lifetime limit on gains qualifying for Business Asset Disposal Relief — the 18% Capital Gains Tax rate formerly known as Entrepreneurs' Relief — falls from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. The 18% rate itself is unchanged. Second, the Government proposes a new Founders' Relief: a 10% rate on up to £10 million of lifetime qualifying gains for eligible founders and significant early investors in high-growth, innovative companies, also from 6 April 2027.

What changes in April 2027?

For a shareholder with qualifying gains above £500,000 and unused BADR entitlement, disposals completing on or after 6 April 2027 would attract the 18% rate on a smaller slice of the gain, with the balance taxed at the normal rates. Anti-forestalling rules have been announced for certain contracts and share arrangements, so neither signing Heads of Terms nor entering into an unconditional contract before the date automatically preserves the existing allowance. The detail of any timing decision belongs with a specialist tax adviser.

Which business owners are affected?

For most established SME owners considering retirement or a confidential trade sale, the revised BADR position is the more immediately relevant measure, because Founders' Relief is aimed at a narrower group. The proposed Founders' Relief conditions include a 25% founding shareholding, a five-tax-year holding period, and company tests of at least £10 million turnover, 15 employees and defined growth or innovation criteria. Founders should not assume they qualify for the new scheme simply because they founded their companies; many successful smaller businesses will fall outside it.

What is the difference between the two reliefs?

BADR is the established regime for owners of trading businesses: 18% on qualifying gains, with the lifetime limit falling to £500,000. Founders' Relief is the proposed 10% regime for founders and early investors in companies meeting demanding scale and growth tests, with a £10 million lifetime limit that would be reduced by BADR and Investors' Relief claims made from 6 April 2027. The two rates cannot apply to the same gain. The permanent guides set out each in full: Business Asset Disposal Relief and Founders' Relief.

Why the commercial fundamentals still matter more

Tax changes alter the net proceeds of a sale; they rarely decide whether the sale itself succeeds. Valuation, sale readiness and buyer quality remain the levers with the largest effect on outcomes. A business that is well prepared, presented to carefully researched trade acquirers and negotiated on structure as well as price will usually produce a better net result than a rushed sale timed around a tax date. Owners considering a sale in 2027 or 2028 are generally better served by starting preparation early than by compressing a process into the months before April 2027.

How to discuss a sale confidentially

EXITS.co.uk advises owners of established UK SMEs on the commercial side of a sale: objectives and timing, readiness, valuation strategy, confidential research into suitable trade acquirers, buyer qualification, negotiation and transaction management, working alongside the owner's own tax and legal advisers. If the Budget has prompted you to think about timing, you can start a confidential conversation or request a considered view of value. Nothing is disclosed to any buyer without your instruction.

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.