BADR Changes in the 2026 Budget: What IFA Sellers Need to Know
Updated: Oct 29
24th April 2026 - Updated 29th October 2026
Summary
On 6 April 2026, the rate of Business Asset Disposal Relief (BADR) rose from 14% to 18%. The Autumn Budget on 28 October 2026 announced a further change, reducing the lifetime limit for qualifying gains from £1 million to £500,000 from 6 April 2027. The 18% rate and £1 million lifetime limit remain in place for the rest of the 2026/27 tax year. For IFA and wealth management business owners considering a sale, these changes are worth understanding before you come to market. This article explains what BADR is, how the relief applies to the sale of a financial planning business, and when it will apply to a transaction.
Table of contents
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR), previously known as Entrepreneurs' Relief, is a Capital Gains Tax relief that can apply when an individual sells qualifying business assets or shares. Qualifying gains are subject to a lifetime allowance of up to £1 million per person until 5 April 2027, when this is due to fall to £500,000.
How has BADR changed over the years?
On 6 April 2026, the BADR rate rose from 14% to 18% for qualifying disposals. In the 2025/26 tax year, the rate was 14%. Before 6 April 2025, it was 10%.
These increases were announced by the government at the Autumn Budget 2024 as part of wider changes to Capital Gains Tax.
More recently, the Autumn Budget on 28 October 2026 announced that the lifetime limit for gains qualifying for BADR will fall from £1 million to £500,000 from 6 April 2027.
For the remainder of the 2026/27 tax year, the BADR rate remains at 18%, with a lifetime limit of £1 million per individual. From 6 April 2027, the rate will remain at 18%, but only the first £500,000 of qualifying lifetime gains will be eligible for the relief, subject to any previous claims.
When does BADR apply in the sale of an IFA firm?
Please note: Below is a high-level overview of the potential tax considerations involved in an asset sale or share sale. It does not constitute tax advice and should not be relied upon as such. Business owners considering or undertaking a transaction should seek advice from an accountant based on their specific circumstances.
The reduction in the lifetime limit from April 2027 will affect both share sales and qualifying capital distributions following asset sales, where BADR is available.
In a share sale/share purchase, the buyer purchases the shares in your company. The consideration is paid to you as the shareholder rather than to the company. This means the main tax for you, as the seller, is Capital Gains Tax on the gain from the sale of the shares. If the relevant conditions are met, you may be able to use BADR to reduce the rate of Capital Gains Tax on qualifying gains. The rate is currently 18%, with a lifetime limit of £1 million until 5 April 2027, reducing to £500,000 thereafter.
In an asset sale, the buyer acquires selected assets of the business rather than the shares. Those assets, which typically include goodwill, the client bank, and the trading name, are sold by the company itself, so the consideration is paid to the company and corporation tax applies to the resulting gain. Because BADR is a personal CGT relief, it is not available at company level.
However, when selling all the assets of a company, the business owners will typically extract the remaining funds from the company. There are many ways of doing this, such as through dividends, pension contributions, or salary. However, most will want to close the company down through a solvent liquidation, such as a Members' Voluntary Liquidation (MVL). Once that is done, excess cash can be paid to shareholders as a capital distribution.
The capital distribution to shareholders may qualify for BADR at this stage, subject to the relevant conditions being met. To understand more about the differences between asset purchases and share purchases, read our guide here.
Worked example
Take a simplified example.
Assume a qualifying gain of £1,000,000, no annual exemption, full BADR eligibility and no previous use of the seller's lifetime limit.
From 6 April 2027, the lifetime BADR limit will fall to £500,000. This means that the first £500,000 of the gain would be taxed at 18%, resulting in £90,000 of tax. Assuming the remaining £500,000 is taxed at the standard Capital Gains Tax rate of 24%, this would result in a further £120,000 of tax.
The total tax payable would therefore be £210,000, leaving £790,000 after tax.
For the remainder of the 2026/27 tax year, the lifetime BADR limit remains at £1 million, with qualifying gains taxed at 18%. On the same £1,000,000 gain, the tax payable would be £180,000, leaving £820,000 after tax.
This means the reduction in the lifetime limit from April 2027 would result in an additional £30,000 of tax on a £1 million qualifying gain.
For comparison, if the same qualifying disposal had fallen between 6 April 2025 and 5 April 2026, when the BADR rate was 14%, the tax would have been £140,000, leaving £860,000 after tax.
The combined effect of the changes since April 2025 is therefore an additional £70,000 of tax on a £1 million qualifying gain from April 2027.
It is worth noting that each individual shareholder has a personal lifetime BADR allowance, subject to any previous claims.
How to prepare to sell your financial planning business in the new tax year
The new tax year is a great opportunity to take stock of where your business stands and what a sale might realistically look like for you. If you are earlier on in the process, our guide to preparing to sell your financial advice firm covers the key steps in full, from assessing your business and understanding your metrics, through to meeting buyers and negotiating terms. It is also worth understanding both how long a sale typically takes and what buyers will scrutinise during due diligence, as both affect how early and thoroughly you need to prepare.
For those weighing up how they would like a transaction to be structured, our guide to asset sales versus share sales covers the practical and tax implications of each route, and what tends to determine which structure suits a given business. Meanwhile our article on how to value an adviser client book in 2026 provides insights into what your business could be worth.
The future of BADR
There are no definitive announcements on further tax changes to CGT or BADR, but given the BADR was previously available at a 10% Capital Gains Tax rate on qualifying gains, and before 11 March 2020 the lifetime limit was £10 million rather than £1 million, it is not out of the realm of possibility that more changes could come into effect in the coming years.
We can never know what the future holds, but we can run scenarios to assess how your sale might be affected by further changes. When working with sellers and discussing their financial requirements for any sale, we would run a sensitivity analysis to understand the potential impact of such changes. This is one reason choosing the right intermediary matters: you need someone who can help you weigh tax, valuation, deal structure and buyer fit together, rather than looking at any one factor in isolation.
If you want to explore your options, Chapters Capital offers a free, confidential consultation. Get in touch to discuss what a deal could look like for your business.
Considering your next chapter?
At Chapters Capital, we specialise in financial planning and wealth management M&A.
If you own an IFA, financial planning or wealth management firm, we can help you understand the options available to you, from pre-sale planning and selling your firm to retire, through to sell and stay structures and partnership programmes.
For a confidential conversation about valuation, buyer fit or your route to market, contact our team.
📞 +44 (0)204 519 7811 | ✉️ info@chapterscapital.co.uk
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