For most of the last decade, owners of advice firms planned their exit around a simple assumption: the first million pounds of gain would be taxed at 10 per cent. That assumption is now two rate rises out of date. If you sell in the 2026-27 tax year, Business Asset Disposal Relief gives you 18 per cent on qualifying gains, not 10, and the difference on a typical firm sale runs to tens of thousands of pounds.
This article sets out what BADR is, what the staged rise from 10 to 18 per cent actually costs on realistic sale sizes, and what you still need to do to qualify. Everything here is stated as at the 2026-27 tax year. The Autumn Budget can change any of it, which is itself a timing consideration worth taking seriously.
What BADR is, briefly
Business Asset Disposal Relief, formerly Entrepreneurs' Relief, reduces the rate of Capital Gains Tax you pay when you dispose of all or part of a business, or shares in your trading company. It applies to qualifying gains up to a lifetime limit of £1 million per person. That limit has applied to disposals made on or after Wed 11th Mar 2020; before that date, under Entrepreneurs' Relief, it was £10 million, which is worth knowing only because some owners still carry the old figure in their heads. The current position is set out in HMRC's guidance on claiming the relief and the HS275 helpsheet.
The relief matters because the ordinary CGT rates are higher. For disposals from Mon 6th Apr 2026, gov.uk states the main rates as 24 per cent for higher-rate taxpayers, and for basic-rate taxpayers 18 per cent within the basic rate band and 24 per cent above it. On the size of gain a firm sale produces, almost every seller lands at 24 per cent for anything BADR does not cover. The annual exempt amount for 2026-27 is £3,000, which on these numbers is a rounding error.
The staged rise: 10, then 14, now 18
The rate of tax paid on BADR-qualifying gains has moved twice in two years. Gov.uk sets out the schedule precisely: 10 per cent on all gains on qualifying assets disposed of on or before Sat 5th Apr 2025; 14 per cent on qualifying disposals between Sun 6th Apr 2025 and Sun 5th Apr 2026; and 18 per cent on qualifying disposals from Mon 6th Apr 2026.
The date that matters is the date of disposal for CGT purposes, which for a share sale is normally the date of the unconditional contract, not the date the money arrives. An owner who exchanged in March 2025 kept the 10 per cent rate. An owner who exchanges today pays 18 per cent on the same gain. Nothing about the firm changed; the calendar did.
It is worth being clear-eyed about what the relief now is. At 10 per cent against a main rate that sat well above it, BADR was a substantial reward for selling a business. At 18 per cent against a main rate of 24 per cent, it is a 6 percentage point discount on the first £1 million of gain. Useful, and worth protecting, but no longer the dominant term in your net proceeds calculation. The structure of the deal, the treatment of any earn-out and the shape of deferred consideration will often move your outcome by more than the relief does, which is why this article sits alongside the rest of the tax and timing pillar rather than replacing it.
What the rise costs on typical sale sizes
The arithmetic is simple, so it is better done honestly than gestured at. Assume the whole gain qualifies for BADR, the full £1 million lifetime limit is available, and we ignore the £3,000 annual exempt amount and any base cost for clarity. These are illustrations of the rate mechanics, not tax advice on your firm.
A £400,000 gain. At the old 10 per cent rate, the tax was £40,000. At 18 per cent it is £72,000. The rate rise costs £32,000 on a gain of this size, all of it inside the lifetime limit.
A £750,000 gain. At 10 per cent, £75,000. At 14 per cent last tax year, £105,000. At 18 per cent now, £135,000. An owner who completed before April 2025 and an owner completing this year, on identical firms at identical prices, are £60,000 apart.
A £1 million gain. This is the case that shows the ceiling. At 10 per cent the tax was £100,000; at 18 per cent it is £180,000. The maximum extra cost of the rate rise is therefore £80,000 per person, because beyond £1 million the relief was never available anyway.
A £2 million gain. The first £1 million qualifies for BADR at 18 per cent, which is £180,000. The second £1 million falls to the main CGT rate of 24 per cent, which is £240,000. Total: £420,000, an effective rate of 21 per cent across the whole gain. Under the old regime the same disposal would have been £100,000 plus the excess at the then main rate. The point to take from the blend is that the larger your gain, the smaller BADR's share of the outcome: on £2 million, the whole relief is now worth £60,000 against a straight 24 per cent charge.
Two further observations follow from those numbers. First, the £1 million limit is per person, and it is a lifetime limit. If you have claimed the relief on a previous disposal, that claim has already consumed part of your allowance. If your spouse or a co-director also holds qualifying shares, each of you has your own £1 million, which is one of the reasons shareholding structure gets looked at well before a sale, ideally as part of a longer preparation runway of the kind described in the 24-month plan to sell your practice.
Second, the gap between 18 and 24 per cent still rewards getting the relief right. Six points on £1 million is £60,000. That is real money for the price of meeting conditions most owner-managed advice firms can meet with modest care.
The eligibility basics
For a sale of shares in your company, the conditions in outline, per gov.uk's BADR guidance, are these. Throughout a two-year period ending with the date of disposal, the company must be a trading company (or the holding company of a trading group), you must be an employee or office holder of it, and you must hold at least 5 per cent of the shares and voting rights, with an entitlement to at least 5 per cent of profits available for distribution and assets on winding up, or of the sale proceeds. For a sale of the business itself rather than shares, the requirement is that you owned the business for at least two years before you sell it.
Each of those legs deserves a moment's thought in the context of an advice firm.
The two-year clock is the reason exit planning and tax planning are the same conversation. If shares moved recently, perhaps into a spouse's name, into a new holding company or between directors, the two-year period may have restarted for the person now holding them. A reorganisation done eighteen months before completion, without advice, can quietly cost a shareholder their relief.
The 5 per cent test catches minority holders. An adviser who was given 3 per cent of the equity as a retention incentive gets no BADR on it, whatever the firm sells for. It also interacts with dilution: options exercised at completion, or an investor round that took a founder just below 5 per cent, can fail the test on the disposal date even though the founder held well above it for years.
The trading company condition is rarely a problem for a working advice firm, but it can become one for a firm that has, in effect, stopped trading and become a vehicle holding cash and investments while the owner winds down. Substantial non-trading activity can jeopardise trading status. An owner running the firm quietly for a few years before selling, letting surplus cash accumulate, should have this looked at rather than assumed.
The employee or office holder condition matters at the other end: an owner who resigns as director and stops working in the business, then sells the shares a year later, may have broken the condition inside the two-year window. Staying on the board until disposal is usually straightforward and usually wise.
None of this is exotic, and none of it is a reason to panic. It is a checklist to put in front of an accountant early, because every one of these conditions is tested over the two years ending on the date of disposal, and by the time heads of terms are signed the two years are already behind you.
How the deal structure interacts with the relief
BADR applies to the gain you crystallise, and when you crystallise it depends on how the deal is built. A clean share sale for cash on completion is the simple case. Most advice firm deals are not the simple case: consideration is commonly split between an amount at completion and further amounts that are deferred, contingent, or both. How an earn-out is characterised for CGT purposes affects when tax falls due and at what rate, and that subject has enough traps to deserve its own treatment, which it gets in how earn-outs are taxed.
The choice between selling shares and selling the business's assets also changes the picture entirely, because an asset sale is a disposal by the company, not by you, and the proceeds then have to be extracted before they reach your hands. The comparison is worked through properly in asset sale versus share sale: the tax comparison; the short version is that the route that maximises your BADR position and the route the buyer prefers are not always the same route, and the difference is a negotiating item like any other.
The Budget caveat, stated plainly
Every figure in this article is the law as it stands for the 2026-27 tax year. The staged rise from 10 to 14 to 18 per cent was itself announced at a Budget, and there is nothing to stop a future Budget moving the rate again, adjusting the lifetime limit, or changing the conditions. Owners who sold before April 2025 at 10 per cent were not cleverer than owners selling now at 18; they were earlier.
That cuts two ways. It is an argument against drift: a sale process that slips from one tax year into the next has, twice in recent memory, cost the seller four percentage points on the first million. It is not, on its own, an argument for selling. Rushing an unprepared firm to market to beat a rate change that may never come is how owners end up accepting weak terms, and the costs of a badly run process, on price, on earn-out structure, on warranties, will usually exceed the tax saved. Tax follows the deal; it should not drive it.
What the rate history does justify is knowing your own numbers before you need them. Work out what your likely gain is, how much of your lifetime limit remains, whether every shareholder passes the two-year and 5 per cent tests today, and what the tax comes to at current rates. Then a Budget announcement is information you can act on within weeks, rather than the start of a scramble.
If you want a number of your own to react to before doing any of that, the free IFA valuation calculator gives you a range and explains the factors affecting it.