If a sale is somewhere on your roadmap — whether that's this year or in three to five years — the tax picture has changed. Business Asset Disposal Relief rose to 18% in April 2026. We're two months into the new tax year, and many founders still haven't reviewed what that means for their exit plan. Here's the honest picture.
What BADR Is and Why It Matters
Business Asset Disposal Relief — formerly Entrepreneurs' Relief — is a reduced Capital Gains Tax rate available to founders selling qualifying businesses or shares. Instead of paying the standard CGT rate of 24%, qualifying gains are taxed at a lower rate, up to a lifetime limit of £1 million.
For most founders, it's the single most valuable tax relief available at exit. On a £1 million qualifying gain, BADR at 18% saves £60,000 versus the standard rate. That's real money — and it rewards the years spent building something.
The relief still exists. But the advantage it offers has been shrinking steadily, and it's worth understanding where it stands now.
How the Rate Has Changed
- Pre-April 2025: BADR rate was 10%
- 2025/26: BADR rate was 14%
- From 6 April 2026: BADR rate is 18%
The gap between BADR and the standard CGT rate used to be 14 percentage points. It's now 6. On a £1 million gain, the maximum tax saving from BADR has fallen from £140,000 in 2024/25 to £60,000 today. Nobody knows whether it will rise again — but the direction of travel over the past two years makes the answer feel fairly obvious.
What This Means in Real Terms
Take a founder selling their business generating a £500,000 capital gain after costs and the annual CGT allowance.
At the old 10% BADR rate they would have paid £50,000 in CGT. At 18% today, they pay £90,000. That's £40,000 more tax on the same transaction — not because the business is worth less, not because the deal is structured differently, but purely because of timing and rate changes.
For founders with exits in the next two to three years, the difference between a structured plan and no plan at all can easily run to five or six figures.
What Qualifies — and What Trips People Up
BADR isn't automatic. The main conditions:
- You must have held the shares for at least 24 months before disposal
- You need to be an officer or employee of the company
- The company must be a qualifying trading company — not an investment vehicle
- The shares must meet the personal company test
These conditions are straightforward for most owner-managed businesses. But they're easy to disrupt. A restructure at the wrong time, shares in the wrong structure, or a drift toward investment income can all affect eligibility. The time to check is now — not when a buyer is at the table.
What Founders Should Do Now
BADR is still worth having. At 18% versus 24%, the saving on a £1 million gain is £60,000. That doesn't happen by accident.
Here's what exit-minded founders should be working through:
- Check your qualifying period. If you're within two years of a planned exit, the 24-month clock matters. Start the conversation now.
- Review your share structure. Do your shares meet the personal company test? Are they held in a way that preserves BADR eligibility?
- Assess your company's trading status. A shift toward investment or property income can jeopardise BADR. If your model has evolved, get this checked.
- Understand your lifetime limit. BADR covers £1 million of lifetime gains. If you've used part of it previously, know what's left.
- Model the deal structure. Asset sale vs. share sale, earn-outs, deferred consideration — all interact with BADR in ways worth understanding before heads of terms are signed.
We're two months into the 2026/27 tax year. For founders with exits on the horizon, the question isn't whether to plan — it's how much runway you have left to do it properly.
If you'd like to understand what your exit could look like and how to structure it tax-efficiently, find out more about our Exit Planning service or speak to a Runway co-founder.
