The Chancellor, John Healey, delivered his first Budget on 28 October 2026. Much of the attention has focused on energy bills and banking measures. However, two announcements could have a significant impact on business owners planning an eventual sale. Notably, Business Asset Disposal Relief changes 2026 are at the forefront of these considerations for many business owners.

If you’ve spent years building a business with the expectation of one day exiting, these changes may affect some of the tax reliefs you were expecting to rely upon. For some owners the impact may be limited. For others, particularly those expecting a larger exit, tax planning is likely to become a more important part of the conversation. This will be true as the Business Asset Disposal Relief changes 2026 take effect.

Business Asset Disposal Relief (BADR) is being cut back

BADR, formerly Entrepreneurs’ Relief, allows qualifying business owners to pay a reduced rate of Capital Gains Tax when they sell their business. The relief had already become less generous when the qualifying Capital Gains Tax rate increased to 18% in April 2026. The Budget now goes further. From 6 April 2027, the lifetime limit on qualifying gains will fall from £1 million to £500,000. These Business Asset Disposal Relief changes 2026 will affect planning for entrepreneurs considering a future business sale.

The Chancellor said this change will have no impact on around three-quarters of claimants. However, owners of businesses expected to generate larger gains on exit may see a meaningful reduction in the value of the relief available to them.

Based on current Capital Gains Tax rates, the reduction in the lifetime BADR limit reduces the maximum potential value of the relief by approximately £30,000.

What could this mean in practice?

Imagine a business owner sells a company and realises a gain of £1 million. Before these changes, the full gain could potentially have qualified for BADR, assuming all qualifying conditions were met. This would also depend on the seller not having already used any part of their lifetime BADR allowance. From April 2027, only the first £500,000 of qualifying gains may benefit from BADR. Any gains above that threshold are likely to be taxed at the standard Capital Gains Tax rates. The precise impact will depend on individual circumstances and the tax rules in force at the time. However, the reduction makes sale planning more important for founders considering an exit in the coming years. Above all, Business Asset Disposal Relief changes 2026 are making advance planning vital.

A new Founders Relief

Alongside the BADR changes, the Budget announced a new Founders’ Relief, also taking effect from 6 April 2027.

Under the proposal, qualifying founders will pay a 10% Capital Gains Tax rate on up to £10 million of lifetime gains. On the face of it, this could be a significant benefit for entrepreneurs. However, there is an important caveat. The relief has been described as being aimed at founders of high-growth, innovative businesses. Detailed proposed qualifying conditions have now been published for consultation. The final legislation has not yet been settled. That means the key question is not whether the headline 10% rate looks attractive. The real question is whether a particular business will qualify.

While the rules are not yet final, the consultation suggests that qualifying founders may need to satisfy substantial ownership, holding period and company growth requirements. This reinforces the point that the relief is intended for a relatively specific category of business rather than the SME market as a whole.  Until the legislation is finalised, founders should be cautious about building future exit plans around the new relief.

Should you accelerate a planned sale?

This is likely to be one of the first questions many business owners ask. At this stage, it is probably too early to draw firm conclusions regarding the Business Asset Disposal Relief changes 2026.

Tax is only one of many factors that influence the timing of a business sale. Valuation, commercial performance, market conditions, buyer appetite, management strength and deal readiness often have a much greater effect on the eventual outcome than tax alone. For some businesses, the tax changes may ultimately be an important consideration. For others, rushing a transaction could be more costly than waiting. The right answer will depend on the specific circumstances of the business and its owners.

Other Budget 2026 measures for growing businesses

The Budget also included a number of measures aimed at supporting investment and growth, including:

  • retaining full expensing for eligible assets
  • increasing the main first-year allowance from 40% to 50%
  • tripling the trading allowance for new ventures to £3,000
  • committing a further £20.4 billion to the National Wealth Fund and British Business Bank

What should business owners do now?

Nothing needs to happen overnight, and the proposals will only become law once the Finance Bill is passed. However, if a sale is even a possibility over the next few years, now is a good time to:

  • understand whether you are likely to qualify for BADR, Founders’ Relief or neither
  • consider whether the timing of a sale may affect your position
  • review your ownership structure and exit objectives
  • ensure your business is prepared for buyer due diligence

Tax is only one part of a successful exit. Buyers will still focus on fundamentals such as contracts, intellectual property, employment arrangements, customer concentration, regulatory compliance and financial reporting. A business that is well prepared for sale is usually in a stronger position regardless of which tax reliefs are available.

Whether you’re considering an exit in 12 months or five years, the earlier you understand your tax position, ownership structure and exit readiness, the more options you are likely to have. If you’d like to discuss what these 2026 Budget changes could mean for your business and your future plans, get in touch with our team at Farringford Legal.