CGT BADR Hits 18% April 6: Prepare Your Business Exit
If you own a business or hold shares in a trading company, you need to know this: your Capital Gains Tax bill will increase sharply from April 6, 2026. Business Asset Disposal Relief (BADR), the CGT rate most business owners rely on, jumps from 14% to 18% on that date. For a £1 million gain, that extra 4% means £40,000 more in tax.
This article explains the BADR CGT rate changes, who qualifies, and whether you should accelerate your exit before the rise takes effect.
Table of Contents
What’s Changing: The BADR Rate Timeline
The headline is straightforward: BADR rates increase across the 2026-27 tax year onwards. Here’s the timeline:
- Until April 5, 2026: BADR rate = 14%
- From April 6, 2026: BADR rate = 18%
- Lifetime limit: Remains £1 million of qualifying gains per individual
This rise forms part of the government’s broader CGT tightening in the 2026 Budget. The 14% rate itself was introduced in April 2025, when BADR rose from 10%. So within twelve months, business owners face an 8-percentage-point increase—from 10% to 18%.
The £1 million lifetime cap hasn’t changed. Once you’ve used your allowance on qualifying disposals, gains above that threshold face standard CGT rates of 18% (basic rate) or 24% (higher rate).
What is Business Asset Disposal Relief?
Not every business sale qualifies for BADR. The relief applies to certain qualifying disposals:
Qualifying assets include:
- Shares in a trading company (if you’re an officer or employee with at least 5% ownership)
- Partnership interests in a trading business
- Sole trader business goodwill and assets
The core conditions you must meet:
- Two-year holding period: You or your company must have owned the asset for at least two consecutive years out of the five years before disposal.
- Trading company test: The company must be a trading company throughout your holding period. Property rental or investment companies don’t qualify.
- Personal company (for shareholders): At the time of disposal, you must have at least 5% of ordinary share capital, and you must be an officer (director or employee).
These conditions are strict. HMRC applies them rigorously, and ownership transfers, corporate restructures, or passive income can disqualify you.
Read More: About BADR
The Cost: BADR Examples at 18%
Numbers help. Here’s what the 18% rate costs in practice:
Gain | At 14% (Current) | At 18% (From April 6) | Extra Tax |
£500,000 | £70,000 | £90,000 | £20,000 |
£750,000 | £105,000 | £135,000 | £30,000 |
£1,000,000 | £140,000 | £180,000 | £40,000 |
Most business owners don’t realise how quickly these figures mount. A modest exit at £500k gain costs an extra £20,000 post-April 6. Larger exits face proportionally bigger hits.
And remember: these figures assume you stay within your £1 million BADR lifetime limit. Exceed that, and standard CGT rates of 24% apply to the overage, making a 2026/27 exit far more costly.
Should You Sell Before April 6, 2026?
The answer depends on your personal situation. Not everyone benefits from rushing a sale.
Reasons to accelerate your exit:
- You’ve already planned your exit for early 2026 and meet all BADR conditions.
- Your business profits and value are stable or declining. Waiting twelve months won’t improve the outcome.
- You’ve already lined up a buyer and can complete by April 5.
- You have headroom in your BADR lifetime allowance and won’t repeat the claim soon.
Reasons to wait:
- Your business is growing strongly. If growth exceeds 4% annually, the gain from holding outweighs the CGT saving.
- You haven’t completed due diligence, corporate restructuring, or tax planning. A rushed sale risks mistakes that cost more than the rate difference.
- Your buyer’s timetable doesn’t align. If the sale naturally completes in Q3 or Q4, don’t artificially advance it.
- You’re close to breaching your £1 million BADR limit. A smaller gain in 2027/28 might fall outside BADR anyway, so the rate rise is irrelevant.
Timing and Completion Risk
The CGT law is clear: the disposal date is the date you become legally bound to sell (the exchange of contracts), not the completion date. This matters.
If you exchange contracts on April 5, 2026, BADR applies at 14%, even if completion occurs in May. Conversely, if you exchange on April 6, the 18% rate applies, regardless of completion timing.
Earn-outs and deferred consideration complicate this. If your sale spans multiple years with contingent payments, BADR still applies on the exchange date, but the cash receipt is spread. You must calculate the gain in the tax year of exchange, not the year you receive funds.
This is where specialist advice pays dividends. A single mistake here can add thousands to your bill.
Anti-Forestalling: HMRC’s Guardrails
HMRC has published detailed anti-forestalling rules to block contrived sales purely to beat the rate rise. In plain terms: you can’t artificially accelerate a disposal to manipulate the tax outcome.
What does this mean practically? A genuine, arm’s-length sale, where buyer and seller negotiate at market rates, stands up to scrutiny. A sale structured solely for tax avoidance does not.
If your disposal exceeds £250,000 in gain, it’s worth obtaining advance HMRC clearance (a formal APAdvice request) to confirm BADR applies and no anti-forestalling rules are triggered. This costs a few hundred pounds but saves tens of thousands if HMRC later challenges the relief.
BADR vs Standard CGT and Investors’ Relief
A quick comparison helps clarify where BADR sits in the CGT landscape:
Relief | Current Rate | From Apr 6, 2026 | Lifetime Limit | Applies To |
BADR | 14% | 18% | £1m | Trading assets, shares, partnerships |
Investors’ Relief | 14% | 18% | £1m (separate) | Angel investment shares |
Standard CGT | 18%/24% | 18%/24% | Annual exemption only | All other assets |
Investors’ Relief, the relief for angel investors in qualifying trading companies, operates independently from BADR. Both have £1 million lifetime limits, but these limits are separate. An investor who’s also an employee can claim both (on different disposals), provided neither exceeds £1 million.
Without BADR or Investors’ Relief, you face standard CGT: 18% for basic rate taxpayers or 24% for higher/additional rate taxpayers.
Other CGT Reliefs That Matter on Exit
The April 2026 deadline is one pressure point, but it’s not the only tax planning angle worth exploring.
Private Residence Relief is worth reviewing if you own business premises that also double as your home or have any residential element. This relief eliminates or reduces gains on your main residence and can overlap with business property sales. Getting the split right between what qualifies for PRR and what claims BADR saves significant tax.
If you’re disposing of mixed-use property or a building with both residential and trading elements, factor in private residence relief calculations alongside your BADR position. The interaction between these reliefs can materially affect your net tax bill.
Common Mistakes Before a Sale
We’ve reviewed dozens of exits. These errors come up repeatedly:
- Outdated rate information: Assuming 10% still applies. It doesn’t, you’re working with 14% now, rising to 18%.
- Failing the two-year test: A recent share purchase or employment doesn’t count if you can’t show two consecutive years of ownership or service.
- Overlooking the lifetime limit: Completing a £1.2 million gain in April 2026 doesn’t save you anything, £200k faces standard CGT rates instead.
- Ignoring anti-forestalling: Structuring a sale purely for tax benefit and having HMRC challenge it months later.
- Bungling the completion date: Thinking completion date is relevant when it’s the exchange date that counts.
Final Thoughts: Take Action Now
April 6, 2026 approaches fast. If you’ve been thinking about exiting your business, the next eight weeks are the time to decide and act.
This doesn’t mean panic-selling. A well-structured exit that completes before April 5 and meets all BADR conditions can save £20,000 to £40,000+ in tax. That’s real money, enough to fund growth in a new venture, bolster a pension, or improve your personal wealth.
But the decision requires clarity: Do you qualify? Is the timing right? What’s your buyer’s timetable? A few hours with a tax specialist costs far less than getting it wrong.
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