BADR rises to 18% from 6 April 2026: what business owners should know

UPECO Columnist
5 hours ago
2 min read

Business Asset Disposal Relief (BADR) has long been one of the key reliefs for business owners planning an exit. It reduces the Capital Gains Tax rate on qualifying business disposals, but that rate is now increasing in stages. After moving to 14% from 6 April 2025, it is rised again, to 18% from 6 April 2026.

For anyone considering the sale of a business, shares in a trading company, or a qualifying business closure, this is no longer a background detail. It can materially change the tax cost of the transaction.

What changed

The government confirmed that the BADR rate will increase:

from 10% to 14% for qualifying disposals made on or after 6 April 2025
from 14% to 18% for qualifying disposals made on or after 6 April 2026.

HMRC’s BADR guidance and manuals also reflect that 18% applies to qualifying disposals from 6 April 2026 onwards.

Why it matters

BADR can still be valuable, but the tax saving is now smaller than many business owners may have assumed based on the historic 10% rate.

That means:

exit timing matters more
eligibility needs checking earlier
transaction structure deserves proper review before heads of terms are agreed

Example A shareholder qualifies for BADR on a £500,000 gain from selling shares in their trading company. At 10%, the tax would have been £50,000 At 14%, the tax becomes £70,000 At 18%, the tax becomes £90,000

So compared with the old 10% rate, the same qualifying gain could now cost an extra £40,000 in tax once the 18% rate applies from 6 April 2026. This assumes the gain falls within the individual’s available BADR lifetime limit and all qualifying conditions are met.

A practical point on timing

Timing is not always as simple as signing paperwork before April. HMRC has anti-forestalling rules for certain contracts and arrangements, and in some cases the effective disposal date can follow completion rather than the date an unconditional contract was first entered into. That means rushed planning close to the deadline can produce the wrong result if not reviewed properly.

Who is affected

This matters particularly for:

owner-managed company shareholders planning a sale
sole traders selling a business
partners exiting a partnership
business owners already in early sale discussions

What to do now

If a disposal is even a realistic medium-term possibility, the right approach is to review:

whether BADR conditions are actually met
whether the disposal timeline is commercially realistic
whether the expected gain sits within the available lifetime BADR limit
whether transaction timing could change the tax rate applied

Final thought

BADR is still useful, but it is no longer the 10% relief many business owners still have in mind. From 6 April 2026, qualifying gains will be taxed at 18%, and that changes the maths of an exit in a very real way.

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ATTENTION!

This article intends to give only a general informative picture and should not, in any case, be taken as a rule. It is strongly recommended to seek a full and professional guidance specifically for your circumstances before making any decisions.