BADR Just Got Cut to £500,000: What Does It Mean for Your Business Sale?

BADR Just Got Cut to £500,000: What Does It Mean for Your Business Sale?

If you're planning to sell your business, Budget 2026 has changed one number that could directly affect your tax bill.

Before today's Budget, the lifetime limit for gains eligible for Business Asset Disposal Relief (BADR) was £1 million.

The government has now announced that the limit will fall to £500,000 for qualifying disposals made from 6 April 2027. BADR itself remains in place, with qualifying gains subject to an 18% CGT rate from 6 April 2026.

So the important question for a business owner is:

How much could this change cost you, and does the timing of your sale now matter?

What Changed in Budget 2026?

The change is straightforward.

Before Budget 2026:
£1 million lifetime limit

From 6 April 2027:
£500,000 lifetime limit

The limit is cumulative over an individual's lifetime. It is not a new £500,000 allowance every time you sell a business.

And BADR has not been abolished.

The change is simply that less of a qualifying gain can benefit from the relief.

What Could That Mean for a £1 Million Gain?

Take a simple example.

You sell your business and make a £1 million qualifying gain, and you have not previously used any of your BADR lifetime limit.

Under the new rules, only £500,000 of that gain could potentially benefit from BADR.

At the current 18% BADR rate:

£500,000 × 18% = £90,000

The remaining £500,000 would fall outside BADR and be taxed at the normal CGT rate applicable to you.

At 24%, that would be:

£500,000 × 24% = £120,000

So, ignoring other allowances, losses and personal circumstances, the difference between applying 18% to the full £1 million and applying it to only £500,000 would be £30,000.

The actual position depends on the individual's circumstances, but the example shows why the reduced limit matters more as the size of the gain increases.

When Does the £500,000 Limit Start?

6 April 2027.

This is important because the £1 million limit does not disappear immediately.

A qualifying disposal made before 6 April 2027 remains subject to the existing £1 million lifetime limit.

For qualifying disposals made from 6 April 2027, the lifetime limit becomes £500,000.

That makes timing relevant for anyone already considering a sale.

But it does not automatically mean you should rush to complete a transaction before April.

A business sale still needs to make commercial sense.

What If the Sale Is Already Being Negotiated?

This is where the detail matters.

The Budget legislation includes special provisions for certain contracts entered into before 6 April 2027 but completed afterwards, as well as certain share reorganisations and exchanges of securities.

So you should not assume:

“If I sign before 6 April, I automatically get the £1 million limit.”

The specific transaction needs to be checked against the transitional provisions.

For a sale already being negotiated, the contract, completion date and transaction structure may all matter.

What If You Have Used BADR Before?

The £500,000 limit is a lifetime limit.

So previous BADR claims can reduce the amount available for a future disposal.

For example, if you have already claimed BADR on £300,000 of qualifying gains, you cannot treat the new £500,000 limit as though you have never used the relief.

HMRC's guidance confirms that previous qualifying gains on which BADR has been claimed count towards the lifetime limit.

That makes your historic BADR claims part of the calculation when planning a future exit.

Does Your Business Sale Qualify for BADR?

Not automatically.

The £500,000 limit only matters if the disposal qualifies for BADR in the first place.

The conditions depend on what is being disposed of. For example, different requirements apply when selling a business compared with selling shares in a personal company, including qualifying ownership and business conditions.

So the first question should not be:

“How much of my gain gets the 18% rate?”

It should be:

“Does my disposal qualify for BADR, and how much of the gain qualifies?”

Only after that can the lifetime limit be applied.

Should You Sell Before 6 April 2027?

Not automatically.

If your business is already ready for sale, the Budget gives you a reason to review the timing.

But accelerating a sale purely to access the larger BADR limit could create a bigger commercial cost if it means:

• accepting a lower valuation;

• rushing due diligence;

• losing a better buyer;

• changing the deal terms; or

• selling before the business is ready.

The better question is:

What produces the best overall outcome after tax and the commercial terms of the sale?

The answer may be to complete before April 2027.

It may also be to wait.

That depends on the actual transaction.

What Should Business Owners Check Now?

If a sale is on your horizon, establish:

• the expected gain;

• whether the disposal qualifies for BADR;

• how much BADR you have previously used;

• the realistic sale and completion dates;

• whether transitional provisions could apply; and

• whether bringing the transaction forward would actually improve the overall outcome.

These are the points that determine whether the Budget change is a minor adjustment or a material cost to your exit.

The Important Change Is the Limit, Not the Relief

Budget 2026 has not abolished Business Asset Disposal Relief.

It has reduced the lifetime limit for qualifying gains from £1 million to £500,000 from 6 April 2027.

For a smaller qualifying gain, the change may have little practical effect.

For a founder expecting a large gain, it could materially increase the CGT payable.

And if your business sale is already on the horizon, the timing now deserves a proper review.

How Evolve Tax Can Help

If you're considering selling your UK business, Evolve Tax can assess how the new BADR limit could affect your exit.

We can review your qualifying position, previous BADR usage, expected gain, transaction timing and wider tax implications before you commit to the sale.

Speak to Evolve Tax before the transaction is underway.

Frequently Asked Questions

1. What is the new BADR lifetime limit?

The lifetime limit for gains eligible for Business Asset Disposal Relief will fall from £1 million to £500,000 for qualifying disposals made from 6 April 2027.

2. Has BADR been abolished?

No. BADR remains available for qualifying disposals. The Budget changes the lifetime limit rather than removing the relief.

3. What is the BADR tax rate?

For qualifying disposals made from 6 April 2026, the BADR rate is 18%, subject to the relevant qualifying conditions and lifetime limit.

4. What happens to a gain above the £500,000 limit?

The portion that cannot benefit from the available BADR lifetime limit is taxed under the normal CGT rules applicable to the individual.

5. Does previous BADR use matter?

Yes. The limit is a lifetime limit, so previous qualifying gains on which BADR was claimed can reduce the amount available for a later disposal.

6. If I sign the sale before 6 April 2027, do I automatically keep the £1 million limit?

No. Special transitional provisions apply to certain contracts entered into before 6 April 2027 but completed afterwards. The specific transaction needs to be reviewed.

7. Should I sell my business before April 2027?

Not necessarily. The new limit makes timing more important, but any potential tax saving needs to be weighed against the commercial value and terms of the sale.

Conclusion

The Budget 2026 headline is simple:

£1 million → £500,000 from 6 April 2027.

But the impact on your own sale depends on the size of your gain, whether the disposal qualifies for BADR, how much of the lifetime limit you have already used and when the transaction takes place.

If a business sale is on your horizon, review the position before you sign the deal, not after.