Business Asset Disposal Relief – How changes to this CGT relief may affect your tax position on a future sale
Rahid Rashid, 13 October 2025
Rahid Rashid, 13 October 2025
For many business owners, the April 2025 change to Business Asset Disposal Relief (BADR) has thrown a curveball into carefully considered exit plans.
Those who had mapped out a mid-to-long-term sale strategy are now facing a higher Capital Gains Tax (CGT) bill than expected, with further increases on the horizon next year.
The impact has been significant enough that many are reconsidering their timing, structure and even the shape of their exit, bringing forward plans to avoid considerable tax liabilities.
While an accelerated sale may seem like a sensible choice for those nearing exit, there must be careful consideration given to the balance between a potential tax bill and a future, higher business valuation.
BADR (formerly Entrepreneurs’ Relief) allows business owners to pay a reduced rate of CGT on qualifying disposals, subject to a lifetime limit of £1 million.
Until this year, the relief meant you paid just 10 per cent CGT on gains, compared with the standard 24 per cent rate for higher-rate taxpayers.
However, from 6 April 2025 the BADR rate increased to 14 per cent. That means a £1 million gain now carries a £140,000 tax liability instead of £100,000 under the previous rules.
From 6 April 2026, the relief is set to become even less generous, as the BADR rate will rise again to 18 per cent.
At that point, the same £1 million gain will carry a £180,000 tax bill. This is an £80,000 increase in just two years.
While BADR remains valuable compared to the main CGT rate, the erosion of the relief is clear. For those planning substantial disposals, timing may be key.
However, a word of caution. It may seem like rushing into a sale to save on tax makes sense, but if this comes at the cost of building additional value in your business, then the tax benefit may outweigh the potential income from a higher sale price.
These changes mean that business owners who delay a sale could face a significantly higher tax bill.
The difference between a 14 per cent and an 18 per cent rate may not seem dramatic at first glance, but on larger exits it can translate into six- or seven-figure increases in tax.
Careful planning around shareholding structures, the use of trusts, employee ownership trusts or even advancing a transaction could help mitigate exposure to the higher rate.
We take a joined-up approach, with our Corporate Finance team working hand in hand with our Corporate and Personal Tax specialists to not only help you structure the commercial side of a deal, but also ensure it is as tax efficient as possible.
If you are considering an exit in the next 12 months, now is the time to act. Speak to Partner, Rahid Rashid (rahidrashid@lubbockfine.co.uk) today to understand how the changes to BADR could affect your plans and what you can do to protect the value of your business.
