Business Asset Disposal Relief – Why Acting Now Could Save You Thousands

If you’ve invested years building your business, you’ll want to make sure you extract your hard-earned capital in the most tax-efficient way when the time comes to step away.

One of the most effective ways to do this is through Business Asset Disposal Relief (“BADR”) — but changes coming in April 2026 mean that delaying your decision could cost you significantly.

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What Is BADR?

BADR (formerly known as Entrepreneurs’ Relief) is a valuable tax relief that can reduce the amount of Capital Gains Tax (CGT) you pay when you sell all or part of your business, or when you close it down.

If you qualify, the gain is taxed at a reduced rate rather than the standard CGT rate (currently 24%).

To be eligible you must:

• Own at least 5% of the company’s ordinary share capital and voting rights.
• Have been entitled to at least 5% of distributable profits and assets on winding up.
• Have owned the shares for at least two years.
• Ensure the company has been trading (or is the holding company of a trading group) throughout that period.

You can claim BADR on up to £1 million of qualifying gains over your lifetime.

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The Rate Changes You Need to Know About

The BADR rate is increasing over the next two years:

• Up to 5 April 2025 – 10%
• 6 April 2025 to 5 April 2026 – 14%
• From 6 April 2026 – 18%

To put that into perspective, a £1 million gain taken before 6 April 2025 could mean a tax bill of £100,000. Wait until after April 2026 and you could be looking at £180,000 – an £80,000 difference.

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BADR and Members’ Voluntary Liquidation (“MVL”)

A Members’ Voluntary Liquidation is often used as part of a tax-efficient exit strategy for solvent companies.

An MVL allows you to treat surplus assets as capital rather than income. This means the funds you extract may be taxed at CGT rates instead of the higher dividend tax rates and if you qualify for BADR, you could reduce the rate even further.

The insolvency profession saw a surge in MVLs in early 2025 as business owners looked to lock in the 10% BADR rate before it rose in April 2025. With another increase due in April 2026, it’s worth reviewing your options now.

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Why You Should Start Planning Now

If you’re thinking about retiring, changing direction, or simply winding up a company you no longer need, timing is everything.

These rate increases are part of a clear policy direction from government, and it’s unlikely this or the next administration will reverse them. That means the sooner you act, the more you could save.

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Working with Accountants and Advisors

We regularly work alongside accountants and tax advisors to help clients close solvent companies in the most efficient way possible. If you’re an accountant, now is the time to have these conversations with clients who may be:

• Nearing retirement.
• Looking to reinvest funds elsewhere.
• No longer trading but holding substantial retained profits.

By collaborating early, we can ensure the right structure and timing to maximise tax savings.

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How We Can Help

We offer:

• Clear, tailored advice on MVLs and BADR eligibility.
• Seamless MVL process management, so you can focus on your next chapter.
• Collaboration with your accountant to ensure the tax position is fully optimised.

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Final Thought

If you’ve worked hard to build your business, don’t let unnecessary tax erode the value you’ve created. With the BADR rate set to rise again in April 2026, now is the time to review your options.

Contact us today for a confidential, no-obligation discussion about whether an MVL is right for you.