Business Asset Disposal Relief: What Business Owners Need to Know for 2027

BADR reduces the Capital Gains Tax rate on qualifying gains from eligible business disposals, within an individual’s remaining lifetime limit. It is the relief previously called Entrepreneurs’ Relief, not a general tax discount on every business sale.

Capital Gains Tax is concerned with a gain, rather than simply the money received. Acquisition cost, allowable costs, losses, exemptions and other reliefs can affect the computation. A headline company value therefore does not establish the seller’s personal tax bill. Shareholders may also have different acquisition costs and different claim histories, even when they sell shares in the same company.

An individual selling qualifying shares in an owner-managed trading company may be able to claim BADR. Selling assets through a company is a different transaction from an individual selling their shares: the company and its shareholders can face different tax consequences. Do not assume a buyer’s proposed asset purchase produces the same personal relief outcome as a share purchase.

The announced change reduces the lifetime qualifying-gains limit from £1 million to £500,000 for qualifying disposals on or after 6 April 2027. The announced measure does not increase BADR’s 18% rate.

HMRC’s policy paper describes legislation to be introduced in a Finance Bill. Until enacted, the reduced limit is an announced legislative change, not a completed change to the law. Owners should distinguish the commencement announced by Government from the detailed application of final legislation.

Previous claims still count. Someone who has already relieved gains of £500,000 or more may have no remaining headroom under the announced lower limit. Someone with a smaller prior claim would need to assess the remaining balance. This is why your adviser needs the history of qualifying gains, not just an estimate of the next sale’s proceeds.

For a standard, non-EMI share disposal, BADR normally requires the relevant conditions to have been met for at least two years up to the sale. Those conditions concern the individual, their rights and the company’s activities, not simply the percentage of shares held.

The individual must be an employee or office-holder, and the company must be a trading company or the holding company of a trading group. Outside the special EMI rules, the company must normally be the individual’s personal company: at least 5% of ordinary shares and voting rights are required, together with the relevant economic entitlement test.

The economic test requires either at least 5% entitlement to profits available for distribution and assets available on winding up, or at least 5% of the proceeds if the company were sold. Share classes, preference rights and shareholder arrangements can therefore matter. Owning 5% of the shares, by itself, is not an adequate eligibility check.

Different provisions can apply to sole traders, partnerships, Enterprise Management Incentive (EMI) shares, cessation, associated disposals, dilution and trusts. EMI is a tax-advantaged employee share-option arrangement with its own conditions. HMRC guidance also describes possible dilution elections where a new share issue takes a holding below 5%. These cases need their own assessment, not a simplified shareholder checklist.

• Check the share register, share classes and actual rights, not just a headline ownership percentage.
• Review employment or office-holder status throughout the relevant qualifying period.
• Assess trading status and any non-trading activities with a suitably qualified adviser.
• Bring earlier BADR claims and proposed consideration terms into the same review.

In a clearly defined illustration, a £1 million taxable gain can produce £30,000 more CGT under the announced lower limit. That result depends on the assumptions below and is not an individual’s tax quotation.

Illustrative tax calculation only: assume a £1 million taxable gain, no earlier BADR claims, the whole gain otherwise eligible for BADR, and the excess above the new limit taxed at 24%. No other reliefs or losses apply; the annual exempt amount and any other adjustments are ignored or already reflected in the stated taxable gain.

Before 6 April 2027: £1 million × 18% = £180,000. Under the announced change: £500,000 × 18% = £90,000, plus £500,000 × 24% = £120,000. Total: £210,000. Illustrative difference: £30,000.

This is not an illustration of a £1 million sale price. A sale price and taxable gain can differ substantially. Nor does the comparison establish that completing earlier is commercially better: a change in price, risk or consideration structure could be more significant than the illustrated tax difference.

A disposal of qualifying shares can potentially benefit from BADR without the shareholder selling every share. The individual and the shares disposed of must satisfy the applicable conditions; retaining equity does not remove the need to check those conditions.

A minority secondary sale means existing shares are sold and the selling shareholder receives proceeds. A company issuing new shares to an investor is different: the investment normally goes into the company, not to the existing shareholder as sale proceeds. A transaction can contain both elements, so the documents and money flows need to be understood separately.

A majority sale with a retained minority can give an owner cash now and continued exposure to future performance. It can also change voting rights, employment status and the nature of the company or group. Those changes may affect a later disposal. A second sale does not automatically qualify simply because the first one did.

Deferred consideration is a price paid later; an earn-out links some consideration to future performance or other conditions. Rollover equity usually involves continuing an investment in the buyer’s ownership structure rather than receiving all proceeds in cash. Each can change timing, risk and the tax analysis. Discuss the commercial terms with an M&A adviser and their tax consequences with a tax adviser before agreeing them.

There is no universal rule that selling before 6 April 2027 is better. Owners with unused BADR headroom above £500,000 have a reason to seek specialist advice about the announced limit change, but tax timing is only one part of a sale decision.

A credible buyer, a sustainable price and a deliverable transaction can be worth more than a potential tax saving. Cash at completion is different from contingent future payments. A buyer with uncertain funding or extensive conditions can create commercial risk, even if their timetable looks attractive. Do not let a date replace buyer qualification or careful negotiation.

Understanding the buyer market early can create choices without committing you to a sale. Establish which buyer types could have a credible commercial rationale, what information they would need and which owner objectives are non-negotiable. This is preparation, not an instruction to accelerate a transaction artificially.

Offsell does not publicly list businesses. Its confidential process combines existing buyer intelligence and acquisition requirements with transaction-specific research and direct outreach. Information is released in stages: the buyer is identified, their rationale assessed, an NDA obtained and seller approval sought where required before named or detailed information is released. An NDA does not guarantee confidentiality, and off-market marketing is not universally the best route.

Signing Heads of Terms before 6 April 2027 does not, by itself, establish that the £1 million limit is preserved. The announced anti-forestalling provisions concern particular contracts and share-reorganisation elections; a specialist must examine the actual legal and tax position.

HMRC describes rules for unconditional but uncompleted contracts entered into before 6 April 2027. The reduced limit applies unless the relevant safeguards are met: no purpose of obtaining a tax advantage through the section 28 Capital Gains Tax timing rule and, for connected parties, a contract entered into for wholly commercial reasons. The policy paper also describes a statement requirement where the gain exceeds £100,000.

Separate provisions concern specified share reorganisations and exchanges, including certain arrangements involving substantially common ownership or control. Where the relevant conditions apply, a section 169Q election made on or after 6 April 2027 is treated as giving rise to a disposal when the election is made. It is not accurate to say every reorganisation is caught, or that any earlier reorganisation preserves the old limit.

Heads of Terms set out the principal proposed deal terms, but their legal effect depends on the document and circumstances. Neither signing an artificial contract nor artificially accelerating a transaction should be presented as securing relief. Refer the contract, completion conditions, connected-party position and any proposed elections to specialist advisers before relying on a date.

BADR is an existing business-disposal relief; Founders’ Relief is a proposed, narrower relief for founders and significant early investors in qualifying high-growth, innovative companies. Their eligibility rules are fundamentally different.

The proposed 10% Founders’ Relief rate and £10 million limit are not available to every business owner. The proposal combines individual conditions with company size, activity and growth or innovation conditions. BADR does not have an equivalent £10 million company-turnover qualification test. Offsell’s usual commercial transaction focus is separate from eligibility for either tax relief.