Thinking of Selling Your Business? Here’s Why Timing Matters
If you’re a company owner planning to sell your business in the next couple of years, there’s a significant tax change on the horizon. From 6 April 2026, the rate of Business Asset Disposal Relief (BADR) will rise from 14% to 18%, making the sale of a business more costly for many directors and shareholders.
This change means that if you’re considering selling your business, you may want to review your plans sooner rather than later.
What Is Business Asset Disposal Relief?
BADR (formerly Entrepreneurs’ Relief) reduces the Capital Gains Tax (CGT) you pay when selling all or part of your business. Currently, it allows qualifying business owners to pay 14% CGT instead of the standard higher rate of 24%.
The relief applies to gains up to a lifetime limit of £1 million, offering potential tax savings of up to £100,000. That said, if you’ve previously claimed BADR, your available relief may be lower.
From April 2026, the rate will rise to 18%, reducing the value of the relief by 40%.
Who Qualifies for BADR?
To be eligible, all of the following must apply:
- You’re selling shares in a trading company
- You hold at least 5% of the company’s shares
- You’re a director or employee of the company
- You’ve met these conditions for at least two years before the sale
If you haven’t yet reached the two-year threshold, you may want to delay your sale until you do, missing this window could mean losing relief entirely.
You can read more about the criteria in HMRC’s BADR guidance.
How Is the Gain Calculated?
In straightforward cases, the gain is the sale price minus the nominal value of your shares.
But it becomes more complicated if:
- Shares were inherited or gifted
- You’ve invested additional share capital over time
- There have been restructures or changes in ownership
Establishing an accurate base cost is critical and any oversight can affect your tax bill significantly.
What Else Should You Consider?
While many owners expect to sell their shares for cash, buyers don’t always agree. In practice, you might be offered:
- A mix of cash and loan notes
- A stake in the newly merged company (via shares)
- A phased deal tied to future business performance
In some cases, the buyer may prefer to purchase the assets of your company rather than the shares, triggering a very different tax treatment.
These scenarios can influence both your tax position and your role in the business post-sale. That’s why it’s essential to start planning early and understand how different deal structures might affect you.
If you’re considering a sale, either now or in the coming years, it’s worth taking the time to understand how timing and structure can affect the outcome. Even small changes in how a deal is arranged can alter your tax position.