The government has halved the lifetime limit for Business Asset Disposal Relief (BADR), meaning some business owners will pay considerably more Capital Gains Tax when they sell up.
From 6 April 2027, the maximum amount of qualifying gains eligible for BADR will fall from £1 million to £500,000. The reduced CGT rate itself stays at 18%.
The change was confirmed in the Budget 2026 Red Book, published on 28 October. The government says three-quarters of BADR claimants will still qualify for relief on their entire gain.
What will the lower BADR limit cost?
BADR applies to qualifying gains made by business owners, including eligible sole traders and shareholders who sell their businesses. It lets them pay CGT at 18% instead of the usual 24%.
To show the impact of the BADR restriction from April 2027, here are example calculations for someone with a £1 million taxable gain who meets all qualifying conditions, has not used any BADR allowance previously, and pays 24% CGT on gains outside the relief.
- Under the existing £1 million limit: The whole gain qualifies for 18% CGT, giving a tax bill of £180,000.
- From 6 April 2027: Only £500,000 qualifies at 18%. The remaining £500,000 is taxed at 24%, bringing the total bill to £210,000.
That’s £30,000 more tax on the same gain. This simplified illustration assumes the gain is already taxable after any annual CGT exemption and other reliefs.
Someone selling a business for less than £500,000 in qualifying gains may see no difference, provided they have sufficient unused lifetime BADR allowance.
What about business owners planning to sell?
The existing £1 million limit remains in place for any qualifying disposals made before 6 April 2027.
The reduced limit will apply to any disposals after this date – subject to any conditions in the final legislation and any relevant anti-forestalling rules.
BADR is not provided automatically. Owners must satisfy conditions covering their business, shareholding or employment, and how long they have held the relevant interest.
Previous BADR claims also count towards the lifetime limit.
For an explanation of the qualifying rules, rates and how to claim, see our Business Asset Disposal Relief guide.
The BADR reduction is one of several business tax changes announced on 28 October. Our Budget 2026 summary for small businesses covers the other measures, including trading allowance, mileage rates and capital allowances.