The Budget on Wed 28th Oct 2026 announced that the Business Asset Disposal Relief lifetime limit will fall from £1 million to £500,000 for qualifying disposals made on or after Tue 6th Apr 2027. The rate stays at 18 per cent. For an owner who has used none of the limit, the most the change can cost is £30,000 a person, however large the gain.
This article sets out what changed, what it costs on the two main routes to a sale, and which date decides the outcome. It is general information, not tax advice. The change is announced and is due to be legislated in the Finance Bill, so it is not yet law, and the draft wording may add detail.
What was announced
HMRC's policy paper and the Budget rates table give these points:
- The lifetime limit is £1 million for 2026-27 and £500,000 for 2027-28.
- The relief rate is 18 per cent in both years, and the main capital gains rate for a higher-rate taxpayer is 24 per cent in both years.
- The limit is per individual, and relief you have claimed in the past counts towards it.
- The annual exempt amount stays at £3,000.
HMRC estimates that about 13,000 of roughly 51,000 claimants will be affected, and that the other 75 per cent will keep relief on their whole gain.
What it costs in pounds
The relief saves 6 points, the gap between 18 and 24 per cent. Halving the limit removes that saving from £500,000 of gain, which gives the £30,000 ceiling. These examples assume a higher-rate taxpayer, no earlier claims, no base cost, a single owner and the annual exempt amount ignored for clarity.
A £400,000 gain. The tax is £72,000 either way. The whole gain sits inside the new limit.
A £750,000 gain. The tax rises from £135,000 to £150,000, an extra £15,000.
A £1 million gain. The tax rises from £180,000 to £210,000, an extra £30,000.
A £3 million gain. The tax rises from £660,000 to £690,000, again an extra £30,000. On a sale of this size the limit is used up either way, so the change is real money and also about 1 per cent of the gain.
The limit is personal, so two shareholders who each qualify are each affected. If two owners split a £3 million gain equally, each pays £30,000 more, or £60,000 between them. If you have claimed the relief before, your room under the new limit may be smaller than £500,000, or gone.
The date that decides it
Plan around your completion date. If a sale completes before Tue 6th Apr 2027, the £1 million limit applies. If it completes on or after that date, assume £500,000.
A rule aimed at contracts signed early is the reason.
A disposal under contract normally takes place at the date of the contract, or when a condition is met if the contract is conditional, which is why signing used to fix the tax year. That no longer settles this question.
For an unconditional contract made before Tue 6th Apr 2027 that has not completed by then, HMRC says the gains will be subject to the £500,000 limit unless the parties can show they did not enter into the contract with a purpose of gaining a tax advantage from the timing rule. Where the parties are connected, the contract must have been made for wholly commercial reasons.
Where either exception applies, a statement is needed if the gain is over £100,000.
So a long-planned deal with a genuine commercial reason for a later completion may keep the higher limit, and your accountant can tell you whether yours would. The detail of the statement has not been published in the paper, and a condition-led contract needs its own reading. Do not assume that signing alone protects anything.
A separate rule covers shares reorganised or exchanged where an election was made to claim the relief. If that election is made on or after Tue 6th Apr 2027, the disposal is treated as happening at that point, so the £500,000 limit applies. If shares in your firm have been reorganised, mention it early.
If you sell your company
On a company sale you sell your shares, so the gain is normally a personal gain and the relief applies directly, subject to the conditions on GOV.UK: the company trades, you are an employee or office holder, and you hold at least 5 per cent, all for at least two years up to the sale. None of those conditions changed in the Budget.
On a £1 million sale with the annual exempt amount taken off, the tax rises from £179,460 to £209,280, an extra £29,820.
If part of your price comes as an earn-out, remember that the earn-out right is taxed as a separate asset, so take advice before assuming the relief reaches any later gain on it.
If you sell your client bank
The answer depends on who owns the client bank.
A sole trader or partner. You can claim on the disposal of the whole or part of your business, if you have owned it for at least two years. HS275 says relief is not available on assets of a continuing business unless they are part of a disposal of a part of the business, and assets sold within three years after the business stops can qualify.
Whether your sale meets that test is one for your accountant. Where it does, the same limit, rate and date apply.
A limited company. The company is the seller, so the money arrives in the company. The relief is not available to companies. Corporation tax comes first, and the Budget limit only matters at the next step, when you take the money out.
If the company is wound up and the money distributed as capital, the relief can apply to that distribution if the conditions are met.
Using the same £1 million client bank sale, with 25 per cent corporation tax and £750,000 distributed that way, and after the £3,000 annual exempt amount, your personal tax rises from £134,460 to £149,280, an extra £14,820. The change is smaller here because less money reaches the personal step.
A client bank sale also leaves you holding the company, its liabilities and the run-off question, while a company sale passes those to the buyer and comes with its own terms. Your options when selling and how asset and share sales are taxed set the two side by side. Neither route is made right or wrong by this change.
Should this change your timing?
For an owner already close to a sale, it is worth a conversation now, because the date is fixed and the contract rule closes the obvious shortcut.
For everyone else, compare the figures. The most this costs one owner is £30,000. A weaker buyer, a lower price, a harder earn-out or thin preparation can cost more than that.
Why deals collapse shows how sales fail. A sale is worth bringing forward if the firm is ready and the terms are good, and the tax is one more reason to look at it.
There is also a separate new Founders' Relief, which the Budget aims at high-growth, innovative companies and which is out for technical consultation until Mon 30th Nov 2026. Do not build a plan on it without asking your accountant whether it could apply to you.
What to check this month
- How much of your lifetime limit you have already used.
- Who holds the shares, and whether each holder meets the conditions.
- Which route you are weighing, and who would actually receive the money.
- Your likely completion date against Tue 6th Apr 2027, and what your contract would need to say.
- Whether any shares have been reorganised, and whether an election was made.
- What the Finance Bill says when it is published, because this article reflects HMRC's paper of Thu 29th Oct 2026.
The net proceeds estimator now asks when you expect to complete and applies the right limit. For the price to put into it, the free IFA valuation calculator gives you a range and explains the factors affecting it.