The Government made significant revisions to Business Asset Disposal Relief (BADR) in Rachel Reeve’s Budget announcement in October this year.  

From April 2025, the current 10 per cent rate will rise to 14 per cent, followed by another increase to 18 per cent in April 2026.  

This change will align BADR with the new lower main rate of Capital Gains Tax (CGT), which also jumps to 18 per cent post-Budget.  

Despite the £1 million lifetime limit remaining unchanged, the benefit of claiming BADR will diminish as the rates increase, impacting the tax savings available. 

For example, a business owner selling assets with a £800,000 gain would face payments of: 

• £80,000 before April 2025 

• £112,000 from April 2025 

• £144,000 from April 2026 

As a result, many business owners are considering accelerating their sales to take advantage of the lower rate before it changes.  

Planning the timing of your sale 

Timing your disposal should account for your broader financial and business goals, as well as the market conditions, which can significantly affect your ability to capitalise on these tax advantages when selling your business. 

If you’re contemplating an exit, it’s best to act sooner rather than later to: 

• Lock in favourable tax rates. 

• Meet the eligibility criteria under the current rules. 

• Maximise the value of your business sale. 

Our team of specialists can guide you through these changes, helping to create a strategic plan to optimise your financial outcomes. 

Are there limitations to BADR? 

As we mentioned earlier, BADR is subject to a lifetime limit of £1 million in qualifying gains. Any gains exceeding this threshold will be taxed at the standard CGT rates applicable at the time.  

If you anticipate gains above the £1 million limit, exploring alternative reliefs may be worth considering.  

Some of the options currently available include: 

• Investors’ Relief, which offers a reduced CGT rate for qualifying investors who have held shares in unlisted companies for at least three years. 

• Enterprise Investment Schemes (EIS), provide tax incentives for investing in high-risk companies, including CGT reliefs under specific conditions. 

However, with the impending changes to the BADR rates and the potential for higher tax liabilities, it’s essential to carefully choose which reliefs to pursue. 

How TWP can help  

From understanding BADR to preparing your business for the market, we offer customised advice and support, including: 

• Tax planning – We will help you maximise your savings and ensure compliance with current rules. 

• Valuation guidance – We will help you understand and enhance your business’s value. 

• Exit strategy – Through our membership of The Corporate Finance Network, we have access to unique resources to help you understand what you need to do to make your business more valuable for your eventual exit. 

The best strategy is one developed in partnership with a tax and accounting expert, so please get in touch with our team to maximise your business sale value today.