If you have built a business over years or decades and are thinking about selling, retiring, or winding up in the near future, there is one number that should be at the front of your mind right now: seventeen.

That is how many days remain before the Business Asset Disposal Relief rate rises from 14% to 18% on 6 April 2026. On a qualifying gain of £1 million — the lifetime limit for the relief — the difference between completing a transaction before and after that date is £40,000 in additional Capital Gains Tax. On a gain of £500,000, it is £20,000. This is not a marginal consideration. For anyone with a significant unrealised gain in their business, the rate change on 6 April 2026 is one of the most expensive tax events of the decade.

At CoreAcc Accountants, we have been working with business owners since the October 2024 Budget to plan around both the October 2024 CGT rate change (when the main rate for business asset gains rose from 20% to 24%) and the phased BADR increases. For some clients, there is still time to act. For others, the immediate window may be closing, but the medium term planning remains critically important. This article explains everything you need to know.

Disclaimer: This article is for general information only and does not constitute professional tax, legal, or financial advice. Exit planning is highly individual. Always seek specific advice before making any disposal or restructuring decision.

1. The Rate History and What It Means

Business Asset Disposal Relief — known until April 2020 as Entrepreneurs Relief — provides a reduced rate of Capital Gains Tax on qualifying gains when a business owner disposes of qualifying business assets. The relief applies to the first £1 million of qualifying gains in a lifetime. Gains above the £1 million limit are charged at the standard CGT rate.

The rate has changed three times in quick succession following the October 2024 Budget announcement. Before 30 October 2024, the BADR rate was 10%. From 30 October 2024 to 5 April 2025, the rate was temporarily left at 10% but HMRC announced the upcoming changes. From 6 April 2025, the rate rose to 14%. From 6 April 2026 — in seventeen days — the rate rises to 18%.

The standard CGT rate on most business gains is 24% for higher rate and additional rate taxpayers. BADR therefore still provides a meaningful reduction — 6 percentage points — on qualifying gains up to the £1 million limit. But the gap between the BADR rate and the standard rate has narrowed from 14 percentage points at the old 10% rate to 6 percentage points at the new 18% rate.

The contraction of that gap has changed the calculus for some planning decisions. The incentive to delay a sale in order to prepare a BADR qualifying disposal was greatest when the difference was 14 percentage points. At 6 percentage points, the benefit of BADR is still real but the flexibility it provides in timing and structuring an exit has reduced.

2. The Qualifying Conditions: What Must Be in Place Before 6 April

The BADR rate does not apply automatically to a business sale. A specific set of qualifying conditions must have been continuously met for at least two years immediately before the date of disposal. Understanding these conditions precisely is essential, because failing any one of them results in the full 24% CGT rate applying.

The personal company conditions

To qualify for BADR on a sale of shares, the company being sold must be your "personal company" at the date of disposal and throughout the two year qualifying period. A company is your personal company if you hold at least 5% of the ordinary share capital and 5% of the voting rights.

Beyond the basic shareholding, you must also be entitled to at least 5% of the profits available for distribution to equity holders and 5% of the assets available on a winding up of the company. These are often referred to as the "economic rights" conditions. They were introduced to prevent arrangements where a person holds 5% of the shares technically but has no real economic stake in the business.

These conditions must all be satisfied continuously for the two year qualifying period, not just at the point of sale.

The employment condition

In addition to the shareholding conditions, you must be an employee or officer of the company throughout the two year qualifying period. Being a director is sufficient — you do not need to be a full time employee. But the officer or employee status must be genuine. A director who has resigned from the board before the sale — for example, where a deal requires clean management succession — may fail this condition if the resignation occurs more than two years before the qualifying condition clock started ticking.

Where a management team is being refreshed or a deal is structured to involve the founder stepping back, the timing of any changes to employment or director status must be reviewed carefully against the qualifying period.

The trading company condition

The company must be a trading company or the holding company of a trading group. A company that carries on investment activity — holding property for rental income, or investing in financial assets — is not a trading company. A company with mixed trading and investment activities must be "mainly trading" — broadly, with more than 50% of its activities by reference to assets, income, and time being trading rather than investment.

Where a company has accumulated significant cash reserves or investment assets alongside its trading activity — a common position for profitable businesses that have retained earnings over many years — the trading status test may require examination. HMRC looks at all the assets of the company and the activities of its employees when assessing whether the company is "mainly trading."

When the two year clock starts

The two year qualifying period must be measured immediately before the date of disposal. For most share sales, the date of disposal is the date of the unconditional contract — not the completion date.

Where a business owner acquires shares through an EMI option scheme, special rules apply. Gains on shares acquired through a qualifying EMI option can attract BADR provided the option was granted at least two years before the disposal — the two year clock runs from the grant of the option, not the exercise. This is a significant advantage for employees and directors who hold EMI options and means that qualifying EMI option gains remain eligible for BADR even where the holder does not own 5% of the company.

3. The Anti Forestalling Rules: What You Can and Cannot Do Before 6 April

The most urgent practical question for many business owners right now is whether a transaction currently in progress can be structured to attract the 14% BADR rate rather than the 18% rate that applies from 6 April 2026.

The answer depends on the date of disposal for Capital Gains Tax purposes — and the date of disposal is a specific legal concept that does not always align with commercial completion.

When is the date of disposal?

For a sale of shares under a contract, the CGT disposal date is the date on which the contract becomes unconditional. If a contract is unconditional at the point it is signed — meaning neither party can withdraw from it and no condition remains outstanding — the disposal is treated as occurring on that date, regardless of when money changes hands or when legal title transfers.

This means that a genuinely unconditional contract signed on or before 5 April 2026 should produce a 2025/26 disposal taxed at the 14% BADR rate, even if completion (the physical transfer of shares and payment of consideration) takes place after 6 April 2026.

The anti forestalling rules

Specific anti forestalling provisions prevent the artificial use of conditional or contrived contracts to manipulate the disposal date. Where a contract purports to be unconditional but contains terms that give one party an effective right to walk away, or where the contract is structured with an artificially early signing date specifically to capture the lower tax rate, HMRC can challenge the stated disposal date.

The anti forestalling rules do not prevent a genuinely unconditional commercial contract from having the legal effect described above. A properly structured, commercially real transaction that is unconditional on or before 5 April 2026 should attract the 14% rate. What the rules target are artificial arrangements — for example, a contract with a nominal condition that can be waived at will, or a document signed without a genuine business purpose before the rate change.

Anyone seeking to lock in the 14% rate through a before April signing should ensure that the contract is genuinely unconditional, that the commercial transaction is real and would have proceeded regardless of the tax consideration, and that the documentation is clear and robust. This is not a situation in which to proceed without specific legal and tax advice.

4. The Members Voluntary Liquidation Route

Not every business exit involves a trade sale to a third party buyer. For many business owners — particularly those who are simply retiring, closing a professional services practice, or winding up a company that has fulfilled its purpose — the appropriate exit mechanism is not a sale but a Members Voluntary Liquidation.

An MVL is a formal statutory process by which the directors and shareholders of a solvent limited company place it into voluntary liquidation. A licensed insolvency practitioner is appointed as liquidator. The liquidator collects the company's assets, settles its creditors and liabilities, and distributes the remaining balance to the shareholders.

The critical tax advantage of an MVL over simply paying dividends and then dissolving the company is in how HMRC treats the distributions. Distributions made in the course of a formal MVL are treated as capital receipts for the shareholders, not as income dividends. This means the shareholders pay Capital Gains Tax on the distribution (potentially at BADR rates of 14% or from 6 April 2026, 18%) rather than dividend tax of up to 39.35%.

For a company with £200,000 of distributable reserves, the difference between an MVL distribution at 14% BADR and an ordinary dividend at 35.75% is approximately £43,500 in tax saved — on the same amount of cash. The MVL more than pays for itself through the tax saving on the distribution.

The timing issue for the April 2026 rate change

An MVL does not take effect instantly. The process of appointing a liquidator, advertising for creditors, and completing the winding up typically takes three to six months in total. However, the date that matters for CGT purposes is not the date the liquidation concludes — it is the date of each distribution made by the liquidator to shareholders.

A liquidator can make interim distributions to shareholders early in the winding up process, before the final accounts and statutory advertisement period are complete. These early interim distributions are treated as capital receipts on the date they are received by the shareholders. If a liquidator makes an interim distribution before 6 April 2026, that distribution is taxed at 2025/26 rates — including the current 14% BADR rate where conditions are met.

The window to initiate an MVL, appoint a liquidator, and make an interim distribution before 6 April 2026 is now extremely narrow. Most licensed insolvency practitioners have indicated that a process started in the final two weeks of March 2026 cannot reliably produce an interim distribution by 5 April 2026. Business owners who had not already started the process by the time this article was written are unlikely to be able to capture the 14% rate through an MVL.

However, this does not make MVL irrelevant after 6 April 2026. The 18% BADR rate through an MVL is still materially lower than the dividend tax rate of 39.35% on the same distribution. An MVL completed after the rate change remains the correct route for a business owner winding up a solvent company with significant reserves.

When an MVL is not the right route

An MVL is appropriate where the company is genuinely being wound up — where the business is finished, the assets are being realised, and the shareholders want to receive the net proceeds. It is not appropriate where the company intends to continue trading, or where the director simply wants to extract a lump sum while the company continues. Using an MVL structure as a tax avoidance mechanism for an ongoing business is a misuse of the process and HMRC will challenge it accordingly.

5. How BADR Interacts With Other Exit Routes

Trade sales

The most common form of business exit is a sale of shares to a third party buyer — a trade buyer, a private equity house, or a management buyout. Where BADR conditions are met, the gain on that sale attracts the BADR rate on the first £1 million of qualifying gains.

Where the total consideration exceeds £1 million of qualifying gain, the excess is charged at the standard 24% CGT rate. For a business owner with a business worth £3 million and a base cost of £100,000, approximately £2.9 million of gain arises. The first £1 million is taxed at 18% from April 2026 (£180,000). The remaining £1.9 million is taxed at 24% (£456,000). Total CGT: £636,000.

At the old 10% BADR rate and the old 20% standard rate (the position in early 2024), the equivalent total was £100,000 plus £380,000 = £480,000. The combined effect of the BADR and standard rate increases since October 2024 has cost this hypothetical seller an additional £156,000.

Management buyouts

Where the buyer is the existing management team rather than a third party, the same BADR conditions apply to the selling shareholders. An MBO is a change of ownership, not a change of business, and the qualifying conditions are assessed in the same way as for any other share disposal. The selling directors must have met the shareholding, economic rights, and officer conditions for two years before the sale.

A common issue in MBO transactions is the treatment of the buying managers who are acquiring shares. The acquisition of shares on an MBO does not attract BADR — BADR only applies to disposals, not to purchases. The buying management team will need to hold their shares for two years before BADR becomes available to them on any future exit. This two year clock starts from the date they acquire the shares in the MBO, not from the date they became employees of the company.

Employee Ownership Trust sales

Selling to an Employee Ownership Trust is an alternative exit route that carries its own separate tax regime. Under the EOT regime, selling shareholders can currently receive 50% relief on qualifying gains — an effective rate of 12% rather than the 18% BADR rate from April 2026. For business owners with gains significantly above the £1 million BADR lifetime limit, the EOT route at 12% effective rate on the whole gain is often more tax efficient than BADR at 18% on the first £1 million and 24% on the excess.

We covered the EOT regime in full in our separate article on Employee Ownership Trusts, including the rule changes introduced at the November 2025 Budget.

6. Worked Examples

Worked Example 1: The Cost of the April 2026 Rate Change on a £1 Million Gain

Emma sold her marketing agency on 28 March 2026 for a net gain of £850,000 after her base cost. She met all the BADR qualifying conditions throughout the two year period before sale. The contract was unconditional on 28 March 2026.

Tax at the 2025/26 BADR rate of 14%: 14% of £850,000 = £119,000.

If she had delayed and the contract had become unconditional on 10 April 2026 instead, the tax at the new 18% BADR rate would be: 18% of £850,000 = £153,000.

The cost of the seventeen day delay: £34,000. In a sale where the buyer is motivated, the commercial due diligence is complete, and the parties are ready, seventeen days is often the difference between before April and after April completion. The £34,000 differential is a genuine commercial consideration in the final negotiation stages.

Worked Example 2: A Gain Exceeding the Lifetime Limit

David sells his engineering business for net proceeds giving rise to a gain of £2,400,000. He has previously used none of his £1 million BADR lifetime limit.

Under the 2026/27 rates (completing after 6 April 2026): BADR at 18% on the first £1 million = £180,000. Standard rate at 24% on the remaining £1.4 million = £336,000. Total CGT: £516,000.

Under the 2025/26 rates (completing before 6 April 2026): BADR at 14% on the first £1 million = £140,000. Standard rate at 24% on the remaining £1.4 million = £336,000. Total CGT: £476,000.

The cost of the rate change for David specifically: £40,000 — the maximum saving available from completing before 6 April 2026 on a gain above £1 million. The standard rate on the excess is unchanged at 24% regardless of timing.

Worked Example 3: MVL Before vs After April 2026

Sophie is a sole director who built up a consultancy company over fifteen years. She has decided to retire and wants to extract £180,000 of retained profit from the company, which will then be wound up.

If she extracts the £180,000 as dividends (paying dividend tax as a higher rate taxpayer in 2026/27): 35.75% of £179,500 (above the £500 allowance) = approximately £64,221 in dividend tax. Net to Sophie: approximately £115,779.

If an MVL is completed with an interim distribution before 6 April 2026 and BADR applies at 14%: CGT of 14% on £176,700 (above the £3,000 annual CGT exempt amount) = approximately £24,738. Net to Sophie: approximately £155,262.

If an MVL is completed after 6 April 2026 with BADR at 18%: CGT of 18% on £176,700 = approximately £31,806. Net to Sophie: approximately £148,194.

The MVL route saves Sophie approximately £39,423 compared to dividends at the new 2026/27 rate — even at the higher 18% BADR rate. The MVL before April 2026 saves approximately £46,483 compared to dividends. The window to capture the before April MVL saving is almost certainly closed for anyone starting the process now — but the after April MVL remains the correct route for Sophie.

7. Exit Planning for Business Owners Not Yet at the Point of Sale

Not every business owner reading this article is on the point of signing a sale agreement. Many will be at an earlier stage — thinking about an exit in the next two to five years, aware that the business will eventually need to transition, but not yet in a position to commit to a timeline.

For this group, the most important action is ensuring that the BADR qualifying conditions are continuously met from now. The two year clock must run without interruption. Any change to shareholding structure, directorship, or the trading nature of the business that breaks the qualifying conditions resets the clock.

Specific risks to monitor include any share issuance to investors, employees, or option holders that reduces the founding shareholder's holding below 5%, any change in the company's activities that moves it away from mainly trading towards mainly investment — which can happen gradually as cash accumulates on the balance sheet, any change in employment or directorship status, and any restructuring of the economic rights attached to the shares.

A BADR eligibility health check — a review of the current shareholding structure, the company's activities, and the director's employment status against the qualifying conditions — is a worthwhile exercise for any business owner who expects to exit within the next five years and has not recently had their position reviewed.

Frequently Asked Questions

What is Business Asset Disposal Relief?

Business Asset Disposal Relief is a reduced rate of Capital Gains Tax available on qualifying gains when a business owner disposes of qualifying business assets. The relief provides a rate of 18% from 6 April 2026 (14% in 2025/26 and 10% before April 2025) on the first £1 million of qualifying lifetime gains, compared to the standard 24% CGT rate on most business gains.

What rate of BADR applies from 6 April 2026?

The BADR rate rises from 14% to 18% on 6 April 2026. This follows the increase from 10% to 14% on 6 April 2025. For qualifying gains up to the £1 million lifetime limit, the effective CGT rate from 6 April 2026 is 18%. For gains above the lifetime limit, the standard 24% rate continues to apply.

What conditions must I meet to qualify for BADR?

You must meet four conditions continuously for at least two years immediately before the date of disposal. You must own at least 5% of the ordinary share capital and voting rights. You must be entitled to at least 5% of the profits available for distribution and 5% of the assets on a winding up. You must be an employee or officer of the company. And the company must be a trading company or the holding company of a trading group. Failing any one of these conditions results in the full 24% CGT rate applying to the entire gain.

What is the BADR lifetime limit?

The lifetime limit for BADR is £1 million of qualifying gains. This is a cumulative limit across all disposals throughout your lifetime — not a per disposal limit and not a limit that resets each year. Once you have used £1 million of BADR, no further qualifying gains can attract the reduced rate. Gains above the lifetime limit are taxed at the standard 24% rate.

Can I lock in the 14% rate by signing a contract before 6 April 2026?

The CGT disposal date is the date on which the contract becomes unconditional. If a genuinely unconditional contract is signed on or before 5 April 2026, the disposal is treated as occurring in 2025/26 and the 14% rate should apply, even if completion occurs after 6 April 2026. Anti forestalling rules exist to prevent artificial arrangements designed to manipulate the disposal date, but they do not prevent a genuinely unconditional commercial transaction from having the standard legal effect. Anyone seeking to use a before April contract to lock in the 14% rate should take specific legal and tax advice to ensure the contract is properly structured.

What is an MVL and when is it the right exit route?

A Members Voluntary Liquidation is a formal statutory winding up process for a solvent company, conducted through a licensed insolvency practitioner. Distributions made in an MVL are treated as capital receipts rather than income dividends, attracting CGT at BADR rates where the conditions are met rather than dividend tax of up to 39.35%. An MVL is the correct route for a business owner who is genuinely winding up a company rather than selling it to a buyer. It is not appropriate as a mechanism for extracting cash from a company that will continue to trade.

Can I still complete an MVL before 6 April 2026 to use the 14% rate?

The window is now extremely narrow. An MVL requires a licensed insolvency practitioner to be appointed, a statutory declaration of solvency to be signed by the directors, and advertisements for creditors to be placed. While interim distributions can be made early in the process, the practical timeline from instruction to first distribution is typically three to six weeks in a straightforward case. With seventeen days remaining before 6 April 2026, most practitioners have indicated that a new MVL instruction started now cannot reliably produce an interim distribution by 5 April 2026. An MVL started after the rate change remains significantly more tax efficient than a dividend distribution.

Does BADR apply to my company car, equipment, and other business assets as well as shares?

BADR applies to several categories of qualifying business disposal, not just shares. It applies to disposals of the whole or part of a business carried on as a sole trader or by an individual as a partner in a partnership, disposals of assets used in a business that is ceasing, and disposals of shares in a personal company. The qualifying conditions differ slightly between these categories. For shares, the personal company conditions described in this article apply. For other business assets, the conditions relate to the nature of the assets and the circumstances of the disposal. CoreAcc Accountants can advise on which category applies to your specific situation.

What happens if the company has significant cash reserves — does it still count as a trading company?

A company whose business consists "wholly or mainly" of trading outside the qualifying definition activities — such as making or holding investments — does not qualify as a trading company for BADR purposes. A company that trades actively but has also accumulated substantial cash reserves or holds investment assets may be at risk if the investment element has grown to represent a significant portion of the company's assets. HMRC looks at all the facts — the nature of the activities, the balance sheet composition, and the pattern of the business over the two year qualifying period. Where a company has significant cash or investment assets alongside its trading activity, a BADR eligibility review is worth undertaking before any planned disposal.

What CoreAcc Accountants Can Help You With

Exit planning is not something that can be pulled together in the final weeks before a deal completes. The two year qualifying period alone means that decisions made today affect your BADR eligibility in 2027 and 2028. And the April 2026 rate change means that for those already in a transaction, the timing of the final steps has never been more financially significant.

At CoreAcc Accountants, we help business owners across Hertfordshire and North London with every aspect of exit planning and transaction tax.

We carry out BADR eligibility reviews, assessing your current shareholding structure, directorship status, and the trading nature of your company against the qualifying conditions — and flagging any risks to eligibility that should be addressed now.

We model the net proceeds under different scenarios — BADR at the current or new rate, EOT at 12% effective, standard rate, and dividend route — so you have a clear picture of what you would actually receive under each exit structure.

We advise on transaction timing and structuring, including the interaction between unconditional contract dates, completion dates, and the applicable CGT rate.

We coordinate MVL transactions, working alongside licensed insolvency practitioners to ensure that interim distributions are timed to maximise the tax efficiency of the winding up process.

We advise on earn outs and deferred consideration structures, where the treatment of future payments can differ significantly from the upfront consideration and requires careful structuring to avoid unexpected tax consequences.

Get in Touch

The 14% BADR rate expires on 5 April 2026. The 18% rate takes effect on 6 April 2026. If you are in a transaction, planning an exit in the next two years, or want to ensure your qualifying conditions are in place for a future disposal, contact CoreAcc Accountants today.

CoreAcc Accountants is an ACCA accredited firm of Chartered Certified Accountants based in Borehamwood, Hertfordshire. This article was published on 20 March 2026 and reflects Capital Gains Tax legislation and HMRC guidance in force at that date. It does not constitute legal, financial, or professional tax advice. Exit transactions are complex and individual. Always seek specific legal and tax advice for your circumstances.

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