The UK's Cheapest Exit Just Got Pricier: Business Asset Disposal Relief Hits 18% in April 2026.

The Incredible Shrinking Tax Break

For most of the last decade, the deal for a UK founder selling their business was one of the best in the tax code. Build a company, sell it, and the first £1 million of gain was taxed at just 10% under what used to be called Entrepreneurs' Relief and is now Business Asset Disposal Relief. Ten pence in the pound. It was the reward the system dangled in front of anyone who took the risk of building something.

That deal is being dismantled in slow motion. The rate went to 14% in April 2025. From April 6, 2026, it's 18%. In two years, the tax on a founder's exit nearly doubled — and almost nobody outside the accountancy world noticed, because it arrived in two quiet steps rather than one loud one.

The relief still exists. The £1 million lifetime limit still exists. But the actual benefit — the gap between the relief rate and what you'd pay without it — has been squeezed so hard that it's worth re-asking whether it still drives your exit planning the way it used to.

§ 01The New Rate, on One Page

Two moving parts changed at once over this period. The relief rate climbed 10% → 14% → 18%. And the main CGT rates were lifted at the October 2024 Budget to 18% (basic) and 24% (higher) for most assets. So in 2026-27, the BADR rate of 18% is now identical to the basic-rate main CGT rate, and just six points below the higher rate. The £1 million lifetime limit is unchanged.

§ 02How the Relief Actually Works

BADR isn't automatic and it isn't generous on volume — it's a lifetime allowance, not a per-deal one. The essentials:

• £1 million lifetime limit. You can claim the reduced rate on up to £1 million of qualifying gains across your entire life, not per sale. The limit was £10 million until March 2020, when it was slashed to £1 million — another quiet erosion most people missed.
• Qualifying disposals. Selling all or part of a trading business held for at least two years; selling shares in a personal trading company where you hold at least 5% of ordinary shares and voting rights and are an officer or employee; or disposing of business assets after the business ends.
• The two-year clock. The qualifying conditions generally have to be met for at least two years before the disposal. Founders who try to restructure shortly before a sale frequently trip this.
• Gains above £1 million are taxed at the ordinary main CGT rate — 24% at the higher band in 2026-27.

§ 03What the Rise Costs — The Shrinking Gap

The honest way to value BADR is not the rate itself but the gap between it and what you'd otherwise pay. That gap is the actual saving.

Look at what happened. Through 2025-26 the saving held at £100,000 even as the relief rate climbed, because the main rate rose in lockstep. But in 2026-27 the relief rate jumped another four points while the main rate stayed at 24% — so the gap collapsed from 10 points to 6, and the lifetime saving fell from £100,000 to £60,000.

In cash, a founder selling a £1 million-gain business now pays £180,000 in CGT, against £140,000 last year and £100,000 two years ago. The relief is still real money — £60,000 is not nothing — but it's a far cry from the headline 10% break that defined the regime for a decade.

§ 04Investors' Relief — the Forgotten Sibling

BADR has a lesser-known twin: Investors' Relief (IR). It was designed for outside investors who back unlisted trading companies — people who put money into a business but aren't employees or officers, so they don't qualify for BADR. It applies the same reduced CGT rate to qualifying share disposals.

IR has had an even rougher couple of years:

• Its lifetime limit was cut from £10 million to £1 million for disposals on or after 30 October 2024 — a 90% reduction.
• Its rate tracked BADR up to 18% from April 6, 2026.

So an angel investor who backed a startup expecting a 10% rate on up to £10 million of gain now faces 18% on up to £1 million. For the early-stage investment community, that's a material change to the after-tax return on exactly the kind of risk capital the relief was meant to encourage.

§ 05Timing an Exit Around the Rate

For the previous two rate rises, there was a genuine race to complete before April 6 to lock in the lower rate. That window has now closed — the rate is 18% and there's no further increase currently legislated, so there's no imminent deadline to sprint for.

What replaces the deadline panic is a more sober question: does BADR still belong at the centre of your exit plan? When the relief saved 10 points, structuring a sale to qualify was almost always worth the effort. At a 6-point saving capped at £1 million, the calculation is closer. For some owners, routing value through pension contributions in the years before a sale, or using holdover relief on a gift of shares to family, now compares more favourably than it did when BADR was doing more of the work.

§ 06What to Do If You Plan to Sell

1. Confirm you actually qualify — early. The two-year holding and 5%-shareholding conditions can't be fixed at the last minute. If a restructure is needed to qualify, the clock has to start two years before you sell.
2. Value the relief honestly. It's a 6-point saving on up to £1 million — a £60,000 ceiling. Plan around that real figure, not the memory of the 10% rate.
3. Compare the alternatives. Pension contributions, holdover relief on gifts, and spreading a disposal across spouses' allowances and limits can all move the needle now that BADR is thinner.
4. Don't forget the main rate above £1M. Gains over the lifetime limit are taxed at 24%. For a large exit, the bulk of the tax is at the main rate anyway, which sharpens the case for broader planning.

For the wider UK picture, the April 2026 dividend tax rise covers the parallel squeeze on company directors extracting profit through dividends, and the capital gains guide lays out the full rate structure. The UK calculator handles the income-tax side of your numbers.

§ 07Key Takeaways

• From April 6, 2026: Business Asset Disposal Relief and Investors' Relief are charged at 18%, up from 14% in 2025-26 and 10% before April 2025.
• £1 million lifetime limit unchanged for BADR. Gains above it are taxed at the main 24% higher rate.
• The real saving has collapsed from a 10-point break (£100,000 on £1M) to a 6-point break (£60,000) as the relief rate caught up with the main rate.
• Investors' Relief was hit twice: its lifetime limit was cut from £10M to £1M in October 2024, and its rate rose to 18%.
• No further rise is currently legislated, so there's no deadline to beat — but the thinner relief is worth re-weighing against pensions, holdover relief, and spousal allowances.
• The two-year qualifying clock is the most common trap; sort eligibility well before any sale.

Disclaimer: Rates and limits are drawn from HMRC's published CGT and Business Asset Disposal Relief rates for 2026-27, the October 2024 Autumn Budget rate schedule, the Taxation of Chargeable Gains Act 1992, and analysis by ICAEW, the Chartered Institute of Taxation, and the major UK firms. This article is informational and is not tax, legal, or financial advice. Consult a qualified UK tax adviser before structuring any business disposal.