Business Asset Disposal Relief:
Key changes coming in 2025 and 2026

If you’re a business owner thinking about selling your shares or planning your exit strategy, now’s the time to take action. Big changes to Business Asset Disposal Relief (BADR) are coming into play on 6 April 2025 and 6 April 2026, and they could impact the tax savings available to you when selling shares or exiting your business. Here’s what you need to know - and why acting sooner rather than later could make a real difference.

What’s BADR and why does it matter?

BADR (formerly Entrepreneurs’ Relief) is a valuable tax break that applies when you sell your shares or business assets. It means any qualifying gains are taxed at a lower rate of just 10%, up to a lifetime limit of £1 million. That’s a pretty sweet deal compared to the usual Capital Gains Tax (CGT) rates, which, as of October 2024, are 24% for higher-rate taxpayers.

But, as with many things, change is coming. And these changes could impact how much tax relief you’re able to claim.

What’s changing?

Starting from 6 April 2025, the BADR tax rate will rise from 10% to 14%. Then, on 6 April 2026, it’ll go up again to 18%.

What does that mean in real terms?

• Right now, if you sell your shares and make a gain of £1 million, your tax bill would be £100,000 (10% of £1 million).
• From 6 April 2025, that same gain will be taxed at 14%, making your tax bill rise to £140,000.
• And from 6 April 2026, the tax rate will be 18%, so the bill would jump to £180,000.

That’s still lower than the standard CGT rate of 24% (£240,000 tax on £1 million), but the savings will be less than what you can get now.

Why act now?

With these changes just around the corner, it’s more important than ever to think ahead and plan accordingly. Here are some steps you might want to consider:

• Think about exiting shareholders: If you’re planning on buying out shareholders, it could be a good idea to act before the new rates take effect to help exiting owners make the most of the current 10% rate.
• Plan for larger disposals: If you’re planning a bigger sale or disposal, wrapping it up before the rates change could mean bigger tax savings.
• Consider management buyouts (MBOs): If you’re looking to sell your business to the management team, acting early could make the transaction more tax-efficient for everyone involved.
• Get professional advice: Every business is unique, so it’s worth speaking to someone who can help you navigate these changes and make sure you’re taking the best steps for your future.

We’re here to help!

Tax changes can feel overwhelming, but don’t worry, you’re not alone. Whether you’re planning a share sale, buying out a shareholder, or thinking about your business exit, we’re here to help you understand how these changes will affect you and guide you through the next steps.

Get in touch today, and let’s make sure you’re in the best position possible to take advantage of these reliefs before the rates change. We’re ready to help you plan your next move with confidence.

The clock is ticking - let’s get planning!