For more than two decades, the tax system has provided some form of preferential treatment for entrepreneurs and business owners when they realise the value they have built up. The names and mechanics have changed, but the underlying policy has been recognisable: qualifying business gains should receive more favourable Capital Gains Tax (CGT) treatment. 

Budget 2026 marks another step away from the generosity of that principle. The Government has announced that the lifetime limit for Business Asset Disposal Relief (BADR) will fall from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. The change is to be legislated in Finance Bill 2026-27, so it remains subject to the Parliamentary process. 

From taper relief to Entrepreneurs’ Relief 

The history helps put the latest reduction in context. Before April 2008, taper relief could reduce the proportion of a capital gain that was chargeable according to how long an asset had been held, with particularly favourable treatment available for qualifying business assets. 

Taper relief was abolished from 6 April 2008 as part of a wider reform of CGT. At the same time, the Finance Act 2008 introduced Entrepreneurs’ Relief for qualifying business disposals. Initially, the relief had a £1 million lifetime limit. That limit then rose rapidly: to £2 million from 6 April 2010, £5 million from 23 June 2010 and £10 million from 6 April 2011. 

For almost nine years, therefore, an individual could potentially benefit from the preferential Entrepreneurs’ Relief treatment on up to £10 million of qualifying lifetime gains. In March 2020, however, the lifetime limit was cut sharply back to £1 million. 

Finance Act 2020 also renamed Entrepreneurs’ Relief as Business Asset Disposal Relief with effect from 6 April 2020. The change of name did not create a fresh lifetime allowance: previous qualifying gains under Entrepreneurs’ Relief count towards the BADR lifetime limit. 

A relief whose value has steadily reduced 

The lifetime cap is only part of the story. For many years, qualifying gains benefited from a 10% CGT rate. That rate increased to 14% for disposals from 6 April 2025 and to 18% from 6 April 2026. 

Taken together, the history shows a marked reduction in the relief’s value. At its high point, Entrepreneurs’ Relief could shelter up to £10 million of lifetime qualifying gains from the standard CGT rate and tax them at 10%. The limit is currently £1 million and the BADR rate is 18%. If the Budget 2026 measure is enacted as announced, from 6 April 2027 only £500,000 of lifetime qualifying gains will fall within the limit. 

That does not make BADR irrelevant. For an owner-manager making a qualifying disposal, a reduced CGT rate on £500,000 of gains can still be valuable. But it does mean that, for larger business sales, BADR is increasingly a relatively limited benefit rather than a defining feature of the tax treatment of an exit. 

Who may be affected? 

BADR can apply to qualifying disposals by individuals, including disposals of all or part of a business and certain disposals of shares in a trading company or holding company of a trading group. Detailed conditions apply. For a disposal of non-EMI shares, these normally include requirements relating to employment or office-holding, a minimum 5% shareholding and voting rights, economic entitlement and a two-year qualifying period. 

The new £500,000 lifetime limit will be particularly relevant to business owners contemplating an exit where expected qualifying gains exceed that amount. Historic claims also matter because BADR and its predecessor share a cumulative lifetime limit. 

What should business owners do now? 

Anyone considering a sale or succession should first establish whether BADR is likely to apply and how much of their lifetime limit has already been used. They should also model the tax consequences using the rates and limits expected to apply at the anticipated disposal date. 

The announced reduction may make transaction timing more significant, but commercial considerations should remain central. Business sales can involve lengthy negotiations, due diligence and conditional contracts, and existing anti-forestalling rules already address certain arrangements intended to secure earlier BADR rates. It would therefore be unwise to accelerate a transaction purely for tax reasons without considering the detailed rules and the wider commercial outcome. 

Whilst the Budget also announced a consultation on a new Founders’ relief on up to £10m gains, the proposal has very limited scope and it seems that the direction of travel therefore remains clear. Taper relief gave way to Entrepreneurs’ Relief; Entrepreneurs’ Relief became BADR; and a relief that once applied to £10 million of lifetime gains at a 10% rate is becoming steadily narrower. The Budget 2026 continues that trend. For business owners approaching an exit, understanding what relief remains available and planning early enough to satisfy the qualifying conditions is increasingly important.