TITLE: Business Asset Disposal Relief: What the £500,000 Lifetime Limit Means for Your Exit
What BADR does for qualifying business disposals
BADR applies to qualifying disposals by individuals, including the sale of shares in a personal company. For qualifying gains, the Capital Gains Tax rate is 18% on disposals made from 6 April 2026. The relief has a lifetime limit: it applies only to the qualifying gains within that individual limit.
Shareholder-directors must meet conditions to qualify. These can include holding shares and voting rights in a personal company, being an employee or office holder, and meeting the relevant tests for at least two years before the disposal. The company must also meet the trading requirements. The full rules depend on your circumstances, so check HMRC’s BADR guidance before relying on the relief.
What changes on 6 April 2027
The Budget 2026 announcement, published on 28 October 2026, reduces the BADR lifetime limit from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. HMRC’s policy paper says the change will be legislated in Finance Bill 2026.
The limit is per individual, and it takes account of qualifying gains on which you have already claimed BADR. Previous claims therefore reduce the headroom available for a later exit. It is not a fresh allowance for every company, shareholding or sale.
The 18% BADR rate is not changing under this measure. Other qualifying conditions also remain in place. The change is to the amount of qualifying gains that can receive the relief.
The government estimates that around 51,000 people claim BADR. About 75% are expected to remain unaffected, while roughly 13,000 individuals may be affected because some of their gains would exceed the reduced limit.
Compare the potential tax on a £900,000 gain
The following illustration shows why the date and your unused lifetime limit matter. It assumes you have made no earlier BADR claims, the entire gain qualifies, and no other reliefs or allowances apply.
| Disposal timing | Illustrative calculation | Illustrative CGT |
|---|---|---|
| Before 6 April 2027 | £900,000 × 18% | £162,000 |
| On or after 6 April 2027 | £500,000 × 18% + £400,000 × 24% | £186,000 |
The 24% figure is the current higher main CGT rate for 2026–27. The second calculation uses it only as an illustration: the applicable rate for a disposal in 2027–28 must be checked at the time, and some gains may be taxed at different rates depending on your circumstances. The example also assumes all of the remaining £400,000 is taxed at 24%.
The difference in this simplified example is £24,000. Your actual liability may differ based on prior BADR claims, eligibility, income, the type of asset and other tax rules. Do not treat the comparison as a forecast or make a disposal decision from the headline rates alone.
Check contract and completion dates before agreeing a sale
A contract signed before 6 April 2027 does not automatically secure the old £1 million limit if completion happens on or after that date. The policy paper sets out anti-forestalling rules for unconditional contracts entered into before 6 April 2027 that complete on or after it.
In these cases, the £500,000 limit generally applies unless the parties can demonstrate that they did not enter the contract to obtain a tax advantage through the timing rule in section 28 of the Taxation of Chargeable Gains Act 1992. Where the parties are connected, they must also be able to demonstrate that the contract was entered into for wholly commercial reasons. A statement must be made where the gain exceeds £100,000 when relying on the relevant exception.
This is why the contract date, completion date and evidence of commercial purpose all matter. Do not assume that signing before the change is enough. Keep the sale documents, negotiations and supporting records together, and confirm how the rules apply before entering into an unconditional contract.
There is also a rule for certain share reorganisations. If you elect on or after 6 April 2027 to disapply the no-disposal rules under section 169Q, the disposal is treated as taking place when you make the election. The £500,000 limit may therefore apply.
If you plan to exit in 2027, use this checklist
- Add up past BADR claims. Check how much of your personal lifetime limit you have already used. This shows your remaining headroom.
- List each shareholding. Co-founders with multiple companies or shareholdings should review each potential disposal alongside their personal claim history.
- Map staged sales. If you expect to sell shares in more than one transaction, check how gains and previous claims may affect the limit available for later disposals.
- Set out the sale timeline. Record proposed contract and completion dates. For a contract near the changeover, identify whether it is unconditional and what evidence may be required under the anti-forestalling rules.
- Review share changes. Include reorganisations, exchanges and elections in your timeline, as these can affect when a disposal is treated as taking place.
- Keep records current. Maintain clear company accounts, share records, transaction documents and evidence of the company’s trading activities. Organised records make it easier to support filings and check the relevant facts.
Act promptly if you have already used part of the £1 million limit, are a co-founder with more than one shareholding, or are planning a staged exit. There is no need to rush into a transaction: timing, eligibility and the anti-forestalling rules need to be considered together.
Keep your company records exit-ready
Consistent bookkeeping will not determine BADR eligibility on its own, but it helps keep financial and company records organised as a sale approaches. That matters for ecommerce sellers with marketplace, payment-provider and bank data to reconcile, as well as SaaS businesses, agencies and other growing SMEs.
Our ecommerce accounting services and accounting services for small businesses in the UK support ongoing bookkeeping and compliance. Structured uk limited company accounting can help keep records ready for year-end reporting and provide a clearer starting point when you need to gather sale documentation.
FAQs
Does the £500,000 limit apply to disposals before 6 April 2027?
No. The policy paper says the reduced limit applies to qualifying disposals made on or after 6 April 2027. Before then, the lifetime limit is £1 million, reduced by any qualifying gains on which you have previously claimed BADR.
Is BADR’s 18% rate changing?
The 18% BADR rate is not changing under this measure. Other qualifying conditions also remain in place. What changes on 6 April 2027 is the amount of qualifying gains that can receive the relief.