Selling your business? The latest Budget could leave you up to £30,000 worse off
For many business owners, selling the company is the reward for years of hard work. For a lot of them, it's a large part of their retirement plan too. So another cut to Business Asset Disposal Relief (BADR) is a real blow, and we think it's an unfair one.
The October 2026 Budget announced that the BADR lifetime limit will fall from £1 million to £500,000 from 6 April 2027. The limit was £10 million before 2020. Meanwhile, the tax rate on qualifying gains has gone up from 10% to 14%, and then to 18% in April 2026.
Put simply, owners who've built up a valuable business will keep noticeably less of the proceeds when they sell. That's a hard message for people who've spent decades taking the risks and putting the hours in.
What could it mean in pounds and pence?
BADR means qualifying gains are taxed at 18%, rather than 24%, the rate most sellers would otherwise pay. That's a difference of six percentage points. Halving the lifetime limit therefore takes away up to £30,000 of tax savings for anyone with enough qualifying gains.
Take a shareholder making a £1 million gain on a sale:
| Before 6 April 2027 | From 6 April 2027 |
Gain taxed at 18% | £1,000,000 | £500,000 |
Gain taxed at 24% | £0 | £500,000 |
Total capital gains tax | £180,000 | £210,000 |
That's £30,000 more tax on exactly the same gain. For perspective, the same £1 million gain would have attracted £100,000 of tax before April 2025, under the old 10% rate. The tax on this sale has more than doubled in two years.
This example assumes the whole gain qualifies for BADR, no BADR has been claimed before, and the seller pays capital gains tax at 24%. Your own figures will depend on your circumstances.
The government says most claimants won't be affected by the lower limit. That may be so. But for owners who've spent decades building a business, £30,000 is a lot of money to lose, and it's the people who've built the most who lose it.
What about the new Founders' Relief?
The Budget also proposed Founders’ Relief: a 10% tax rate on up to £10 million of lifetime gains from April 2027. At first glance, that sounds like a return to the old Entrepreneurs’ Relief. Unfortunately, the proposed conditions are much narrower.
Under the consultation proposals, the company would need turnover of at least £10 million in the accounting period before the sale, at least 15 full-time employees and sustained rapid growth in employee numbers (broadly 25% a year compounded over three years). The shareholder would also need to meet demanding ownership and residence conditions, including holding at least 25% of the shares from the start of trading and for at least five years.
That's aimed at fast-growing businesses. It's unlikely to help many established family companies, trades businesses or local professional firms. Previous BADR claims would also eat into the proposed £10 million Founders’ Relief limit.
These are consultation proposals, not final legislation. The consultation is due to close on 30 November 2026, so the detail may still change.
Thinking of selling in the next five years?
You don't need to rush into a sale because the rules are changing. But you should know what the business might be worth, what you'd actually take home and what you can do now to improve both figures.
It's also worth keeping the tax in proportion. A business that's well managed, profitable and able to run without its owner is easier to sell, and will usually command a better price. Improving what a buyer will pay can be worth far more than £30,000 of tax relief, so that's where much of the planning effort should go.
There are several things worth looking at now. Some affect the tax you'll pay. Others could make a much bigger difference to the price someone is prepared to pay for your business.
Work out your likely net proceeds. Start with a sensible valuation, then estimate the tax. A headline sale price isn't the same as the money you'll receive.
Check your BADR eligibility early. Broadly, shareholders need to meet shareholding, voting-rights, employment or office-holder and trading-company tests for the required two-year period. Don't assume you qualify simply because you own the business.
Review share ownership. The BADR lifetime limit applies to individuals. Where a spouse or civil partner genuinely owns shares and meets the conditions, their own relief may be available. Timing and the precise rights attached to shares matter.
Plan how to deal with surplus cash. Salary, dividends and employer pension contributions can all have a place, depending on the circumstances. Excess cash or investments may also complicate the trading-company analysis.
Make the company less reliant on you. Buyers value a capable management team, dependable systems and customer relationships that do not depend entirely on the owner.
Keep the records tidy. Accurate accounts, up-to-date contracts and well-organised company records make due diligence less painful and reduce the risk of a buyer renegotiating the price.
Consider the likely buyer. A trade sale, management buyout or employee ownership trust can produce very different outcomes. It's worth exploring the options before someone makes an offer.
If a sale is already under way, the 6 April 2027 date matters. Contracts exchanged before then but completed later can be subject to special rules, so don't rely on the contract date without taking advice.
The bigger picture
It's worth planning for the rules changing again. BADR has been cut back again and again since 2020, and five years is long enough for another Budget or two. We'd suggest working out whether your plans still make sense with no BADR at all. If they do, any relief that's still around when you sell is a bonus.
At AK Tax & Accountancy Ltd, we work with owner-managed businesses on both sides of the equation: improving the business itself and planning for the eventual sale. We can help you understand what a sale might leave you with, review your BADR position and work with your solicitor and other advisers when the time comes.
You don't need to be actively looking for a buyer to start planning your exit. The earlier you start, the more options you're likely to have. If selling your business is something you're considering over the next few years, we'd be happy to talk through what you want to achieve and how to get there.
Important: This article is based on the October 2026 Budget announcements and consultation proposals described above. The rules may change before legislation is enacted. The examples are simplified and are not personal tax advice.
