Business Asset Disposal Relief Halved To £500,000: Should You Sell Before 6 April 2027?
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Selling before 6 April 2027 saves tax only if your qualifying gain, plus any Business Asset Disposal Relief (BADR) you have already used, exceeds £500,000. Even then, the most you can save is £30,000. For the 2026/27 tax year BADR taxes up to £1,000,000 of lifetime gains at 18%; from 6 April 2027 the limit falls to £500,000.
That cap on the saving is the number to hold on to. It should decide how hard you push a buyer on timing, and whether you push at all.
What did Budget 2026 change about Business Asset Disposal Relief?
Business Asset Disposal Relief is a Capital Gains Tax (CGT) relief that taxes qualifying gains on selling a business, or shares in your own trading company, at a reduced rate up to a lifetime limit.
HMRC's policy paper on the new BADR lifetime limit, published on 29 October 2026, confirms that the lifetime limit falls from £1,000,000 to £500,000 for qualifying disposals made on or after 6 April 2027. The rate stays at 18%. The legislation will be in the Finance Bill that follows the Budget, and the limit takes account of relief you have claimed on earlier disposals.
The rate has already done most of the damage. BADR was 10% for disposals up to 5 April 2025 and 14% for 2025/26, and has been 18% since 6 April 2026. With the main CGT rate at 24% for higher and additional rate taxpayers in 2026/27, BADR is worth 6 percentage points on each pound of gain it covers. On £1,000,000 that is £60,000. On £500,000 it is £30,000.
The same paper estimates that about 51,000 people claim BADR, that about 75% of them (roughly 38,000) will be unaffected, and that about 13,000 will lose relief on part of a gain.
Capital Gains Tax is not devolved, so all of this applies in the same way whether you live in England, Scotland, Wales or Northern Ireland.
Who loses out, and by how much?
You are affected only if your remaining lifetime limit is above £500,000 and your qualifying gain uses more than £500,000 of it. If you have claimed BADR before, deduct what you have used: someone who claimed £300,000 on an earlier sale has £700,000 left until 5 April 2027, and only £200,000 from 6 April 2027.
Qualifying gain (no earlier BADR claims) | Extra CGT if you sell on or after 6 April 2027 |
£500,000 or less | £0 |
£600,000 | £6,000 |
£750,000 | £15,000 |
£900,000 | £24,000 |
£1,000,000 or more | £30,000 |
The extra tax is 6% of the slice of gain between £500,000 and £1,000,000, assuming you are a higher or additional rate taxpayer. The table ignores the annual exempt amount (the first £3,000 of gains each year that is tax free); the worked example below includes it.
Example: a director selling a company for a £900,000 gain
Example: a director has owned 100% of a trading company since 2015, has never claimed BADR, is a higher rate taxpayer and has agreed heads of terms that will produce a £900,000 gain on the shares.
If the sale completes on or before 5 April 2027:
Gain after the £3,000 annual exempt amount: £897,000.
All of it falls within the £1,000,000 limit, taxed at 18%: £161,460.
If the sale completes on or after 6 April 2027:
£500,000 at the BADR rate of 18%: £90,000.
The remaining £400,000, less the £3,000 annual exempt amount, is £397,000 at 24%: £95,280.
Total: £185,280.
Completing early saves £23,820. Two things change the picture.
The first is price. Because every pound of the early-sale gain is taxed at 18%, a £1 cut in price costs the seller 82p after tax. A price reduction of more than about £29,000 to get the deal done before 6 April 2027 leaves the director worse off than completing later at full price. A buyer who knows you are racing a deadline will often ask for exactly that kind of concession, through price, a larger retention or tougher warranties.
The second is cash flow. Gains on shares are reported on your Self Assessment return. A sale completed in 2026/27 means CGT is due by 31 January 2028; a sale completed in 2027/28 means CGT is due by 31 January 2029. Waiting past 5 April 2027 costs £23,820 more tax in this example, but it is paid twelve months later.
The short video on this page works through this example and the price boundary. Its conclusion is that rushing a sale is worth it only when the gain is well above £500,000 and the buyer accepts the timetable without extracting a concession larger than the tax saved.
Interactive BADR Tax Savings Dashboard: Selling Before 6 April 2027
This interactive dashboard helps you visualise the financial impact of the upcoming Business Asset Disposal Relief (BADR) reduction, revealing exactly how much Capital Gains Tax you could save by completing a business sale before 6 April 2027. Simply enter your expected qualifying gain and any BADR allowance you have already utilised from previous disposals to instantly compare your tax liabilities under the current £1 million and future £500,000 lifetime limits. By exploring the dynamic charts and price concession analysis, you can confidently weigh the maximum £30,000 tax saving against potential buyer negotiations to decide if rushing your deal is truly the most profitable strategy.
Does signing a contract before 6 April 2027 lock in the £1,000,000 limit?
Not on its own. For CGT, a disposal under an unconditional contract normally happens on the date of the contract, not on completion. Budget 2026 closes that route with an anti-forestalling rule (a rule that stops people bringing a transaction forward purely to beat a tax change).
HMRC's policy paper states that where an unconditional contract is entered into before 6 April 2027 but completes on or after that date, the £500,000 limit applies unless you can show either that the contract was not entered into to obtain a tax advantage from the contract date rule, or, where buyer and seller are connected, that it was entered into wholly for commercial reasons. Where you rely on that exception and the gain is over £100,000, a statement is required.
This is the same structure HMRC used for the BADR rate rises in 2025 and 2026, set out in HMRC's Capital Gains Manual at CG64174. The arrangements HMRC's own examples target are contracts with friendly or newly formed buyers signed to fix a date while the real sale is still being negotiated. A contract with an unconnected buyer, negotiated at arm's length, signed when the deal was ready and completing a few weeks later for ordinary reasons such as regulatory clearance, is the case the exception is designed to protect.
The safer course, where you control the timetable, is completion on or before 5 April 2027. Pro Tax Accountant's view is that a deal relying on the contract-date exception should have its commercial reasons for the timetable written down in the transaction file at the time, not reconstructed if HMRC asks.
What about share-for-share exchanges, loan notes and earn-outs?
The structure of the consideration can move the date your gain is taxed, and with it the limit that applies.
Where you exchange your shares for shares or loan notes in the buyer, the gain is normally deferred, and BADR can be lost or tested at a later date unless you elect to have the gain taxed at the time of the exchange. HMRC's policy paper sets out a transitional rule for share reorganisations and exchanges: if you elect to treat the exchange as a disposal so that BADR can be claimed, and you make that election on or after 6 April 2027, the disposal is treated as happening when the election is made and the £500,000 limit applies. If you are taking paper rather than cash, decide before 6 April 2027 whether to crystallise the gain.
With a cash earn-out, the value of the right to future payments is normally taxed as part of the sale at completion, with BADR available on that value. Later payments above that value are a separate gain that does not qualify for BADR, whatever the date.
These points depend on the exact terms of the sale agreement and are where most of the tax in a sale is won or lost. If your consideration includes shares, loan notes or deferred payments, or if you have claimed BADR before, it is the point at which you need the figures modelled on your actual deal. Pro Tax Accountant's capital gains and business sale planning service checks that you meet the BADR conditions, calculates your remaining lifetime limit, models the tax under each completion date and consideration structure, prepares any election or anti-forestalling statement, and reports the disposal on your Self Assessment return.
Should you wait for Founders' Relief instead?
For a small number of founders, yes, and this is the interaction that reverses the usual advice. Budget 2026 also announced Founders' Relief, a new 10% CGT rate on up to £10,000,000 of lifetime gains for disposals on or after 6 April 2027.
HMRC's policy paper on the new Founders' Relief sets a high bar. You must have held at least 25% of the ordinary share capital when the trade began, held the shares for at least 5 tax years, and been UK resident for at least 5 continuous tax years. The company must have turnover of at least £10,000,000 and at least 15 qualifying full-time employees in the year before the sale, and meet at least two of three growth tests on turnover, headcount or research and development spending. The paper expects about 600 individuals a year to qualify.
If you meet those conditions, the director in the example above would pay about £89,700 at 10% on a £897,000 gain after 6 April 2027, against £161,460 at 18% for selling early. BADR claims made from 6 April 2027 also reduce the £10,000,000 Founders' Relief limit.
The ground here is not firm. Founders' Relief is subject to a technical consultation launched on 28 October 2026, and the conditions could change before the legislation is final. Do not delay a sale for it unless you clearly meet the published tests with margin to spare.
What to do before 6 April 2027
By December 2026: confirm you meet the BADR conditions on GOV.UK's Business Asset Disposal Relief eligibility guidance (for shares, at least 5% of the shares and voting rights, a 5% economic interest, being an officer or employee, and the company trading, all for at least 2 years before the sale) and add up any BADR you have claimed on earlier disposals.
By December 2026: work out the tax under both completion dates and the price concession at which completing early stops being worth it.
Before agreeing heads of terms: if the deal includes shares, loan notes or an earn-out, settle how and when each part will be taxed.
On or before 5 April 2027: complete, if early completion is worth it and achievable without a concession larger than the saving. If an unconditional contract will complete on or after 6 April 2027, record the commercial reasons for the timetable at the time.
By 31 January 2028 for a 2026/27 sale, or 31 January 2029 for a 2027/28 sale: report the gain, claim BADR and pay the CGT through Self Assessment.
FAQs
Can my spouse and I each use a £500,000 limit?
Yes, each person has their own lifetime limit, but your spouse or civil partner must meet the BADR conditions personally for at least 2 years before the sale, including holding at least 5% and being an officer or employee. A transfer of shares to a spouse in 2026 will not qualify them for a sale before 6 April 2027.
I claimed BADR on an earlier sale. Does that count against the £500,000?
Yes. HMRC's policy paper confirms the limit takes account of relief claimed on past qualifying gains. If you have already used £500,000 or more, you will have no BADR left for disposals on or after 6 April 2027.
Is the BADR rate going up again in April 2027?
No change to the 18% rate was announced at Budget 2026. The change from 6 April 2027 is to the lifetime limit only, so the rate on gains within the limit stays at 18%.
How long do I have to claim BADR?
You claim BADR on your Self Assessment return or separately in writing to HMRC. The deadline is the first anniversary of 31 January following the tax year of the sale, so for a sale in 2026/27 the claim must be made by 31 January 2029.
Does BADR apply if I am closing my company rather than selling it?
It can. Distributions in a members' voluntary liquidation can qualify where you meet the conditions, and the same £500,000 limit applies to distributions received on or after 6 April 2027. The rules that can tax liquidation distributions as income instead are a separate matter.
About the Author:
Adil Akhtar, ACMA, CGMA, FCMA (membership ID is 990250923) serves as CEO and Chief Accountant at Pro Tax Accountant, bringing over 18 years of expertise in tackling intricate tax issues. As a respected tax blog writer, Adil has spent more than eighteen years delivering clear, practical advice to UK taxpayers. He also leads Advantax Accountants (registered with Companies House), combining technical expertise with a passion for simplifying complex financial concepts, establishing himself as a trusted voice in tax education.
Email: adilacma@icloud.com
Disclaimer: This article sets out the general position under UK tax law for the 2026/27 tax year. The information has been checked against HMRC guidance and other official sources at the date shown above, and is reviewed when the rules change. Tax legislation is complex and outcomes depend on your individual circumstances, so this article is provided for general information and does not constitute advice on which you should act. Any figures or worked examples are illustrative. Before making any decision, obtain advice specific to your situation from a qualified professional. Pro Tax Accountant accepts no liability for loss arising from reliance on this article alone.
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