Business Asset Disposal Relief: Why Timing Still Matters for Owner-Managers

Over the last decade, the way business owners are taxed when they exit their company has changed more than once. What many people still refer to as “Entrepreneurs’ Relief” is now called Business Asset Disposal Relief (“BADR”), but the principle behind it remains the same.

In simple terms, it’s a tax relief that can reduce the amount of Capital Gains Tax you pay when you sell or close a business and take the value out as capital rather than income.

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A short look back

For many years, business owners have benefited from a range of concessions that made it more attractive to build and exit a company.  One of those was ESCC16, a long-standing tax concession that helped directors extract funds when a company was wound up.

That was later formalised into Entrepreneurs’ Relief and more recently renamed Business Asset Disposal Relief. Successive Governments have adjusted the rules and the limits, but the core idea has stayed consistent; to recognise the risk and effort involved in building a business by offering a lower rate of tax when you step away from it.

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What the relief actually does

When a company is closed in a solvent liquidation (also known as a Members’ Voluntary Liquidation (“MVL”),the money and assets left in the business are treated as capital, not salary or dividends.

That matters because capital is taxed differently.

If you qualify for BADR, the tax rate on those gains is lower than the standard Capital Gains Tax rate.  For many owner-managers this can mean a significant difference in what they take home at the end of the process.

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Who typically uses it?

We see BADR used in a range of situations, for example:

• A founder who has built a business over many years and is now retiring or stepping back.
• A director who has sold the trading side of the company and is closing down what remains.
• An owner-manager who is restructuring, winding down one company and moving on to a new venture.
• An owner-manager who is restructuring, winding down one company and moving on to a new venture.

The common thread is that the company is still solvent, with enough assets to pay its bills, taxes and staff before any funds are distributed to shareholders.

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Why timing is back in focus

With the forthcoming increase in the BADR tax rate to 18%, there is still a window for directors to get their plans in place. This doesn’t mean rushing into decisions, but it does mean understanding what needs to happen, and in what order, if you want to make use of the current relief.

That usually involves:

• Making sure all tax affairs are up to date.
• Understanding the value of the company’s assets.
• Planning for employees, leases, and ongoing contracts.
• Coordinating closely with your accountant and tax adviser.
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A real-world example

This morning, we met with a client who is still trading but taking steps to wind the business down in an orderly way.  The plan is to sell the assets, deal properly with staff and liabilities, and then place the company into liquidation in time to distribute the majority of the funds before the rule changes take effect.

In this case, the business holds assets of over £480,000.  The difference in tax treatment is not theoretical, it’s a material sum that directly affects what the owner can take forward into whatever comes next.

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How we support the process

At Certus, we have extensive experience within this space and our role is to sit between the director, their accountant, and their tax adviser, to make sure the legal and practical steps line up with the financial planning. That means no last-minute surprises, no missed deadlines, and a clear, well-managed path from trading company to closed company.

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Final thought

BADR isn’t about clever tax planning or shortcuts, it’s about understanding the rules, planning early and getting the right people around the table.

If you’re thinking about exiting, restructuring or winding down a business, now is the time to start those conversations while there’s still room to make informed, measured decisions.

Time is of the essence with the rate of BADR increasing from 14% to 18% after the 5 April 2026.

If you would like to discuss your options or understand whether an MVL could be appropriate for your circumstances, please contact us for a confidential, no-obligation conversation.

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