The Autumn 2026 Budget has introduced significant changes to the capital gains tax regime for business owners. Here’s what the announcements could mean for your future exit and succession planning.
Business Asset Disposal Relief: A reduced lifetime limit
Business Asset Disposal Relief (BADR) has long provided a reduced rate of Capital Gains Tax (CGT) on qualifying business disposals. From 6 April 2027, however, the lifetime limit on gains eligible for the relief will fall from £1 million to £500,000. The applicable CGT rates remain unchanged.
For many owner-managed businesses, BADR will still provide a valuable tax benefit on exit. However, for those expecting larger gains, the reduction in the lifetime limit could significantly reduce the overall tax saving available.
A new Founders’ Relief regime
Alongside the BADR changes, the Government has announced a new Founders’ Relief regime expected to take effect from 6 April 2027, which aims to support individuals to start and scale high-growth, innovative businesses.
The new relief is designed to provide a 10% Capital Gains Tax rate on qualifying disposals of up to £10 million of lifetime gains for qualifying founders of high-growth and innovative businesses. This lifetime limit is reduced by amounts claimed under BADR or Investors Relief from 6 April 2027.
Based on the information released so far, eligibility is expected to depend on factors such as:
- Being a genuine founder and holding at least 25% of company shares at the point when the trading activity commenced;
- Holding those shares for a minimum of five years;
- Operating within a qualifying trading business that meets certain growth or innovation conditions; and
- The company having generated a turnover of at least £10 million in the period prior to disposal.
For those who meet the qualifying conditions, Founders’ Relief will be a welcome introduction following the changes to BADR in recent years. However, the proposed eligibility criteria are likely to limit access to the relief, with HMRC estimating that only around 600 claims will be made each year.
Looking ahead
The introduction of Founders’ Relief could reshape the tax treatment of entrepreneurial exits, particularly for founders of high-growth businesses. While the reduction in the BADR lifetime limit may come as a disappointment to some business owners, the new relief could create valuable opportunities for qualifying founders.
Many of the detailed qualifying conditions for Founders’ Relief remain subject to consultation and draft legislation. Important questions remain around who will qualify and how the regime will operate in practice. Nevertheless, founders and business owners considering a future sale, succession plan or other exit strategy may wish to start assessing the potential impact of these changes now.
We will continue to monitor developments and provide updates as further details emerge.
If you would like to discuss how the Budget announcements could affect your business or future exit plans, please get in touch with James Gramston, Hospitality Tax Director, or Anna Pettitt, Hospitality Tax Manager.
You can also read our Full Autumn Budget Summary here.
