Business asset disposal relief after the Budget: the £500,000 limit and Founders' Relief

The Budget on 28 October 2026 halved the lifetime limit for business asset disposal relief from £1m to £500,000, for sales from 6 April 2027. The rate stays at 18%. It also brought in a new Founders' Relief, which charges 10% capital gains tax on up to £10m of gains.^1,2

Main capital gains tax rates didn't change.¹ Here's what changes in April and what it could mean if you're planning to sell.

How business asset disposal relief works now

Until 5 April 2027, business asset disposal relief charges 18% capital gains tax on up to £1m of qualifying gains over your lifetime.^1,3 Gains above that are taxed at normal capital gains tax rates, which is 24% for higher and additional-rate taxpayers.⁴

The business asset disposal relief conditions depend on how you own the business. If you're selling shares, you need to have been an employee or officer of a trading company, and held at least 5% of the shares and voting rights, for at least two years up to the sale. You also need at least 5% of the profits and assets, or of the sale proceeds. Sole traders and partners need to have owned the business for two years. If you close the business instead of selling, the assets have to be sold within three years.⁵

What changes from 6 April 2027

The lifetime limit falls to £500,000.¹ Compared with the 24% rate, the relief will be worth up to £30,000, half what it's worth today.^1,4 The Chancellor said the change means "no changes for three in four claimants".⁶

Founders' Relief

Founders' Relief applies a 10% rate of capital gains tax to qualifying share sales on or after 6 April 2027, on up to £10m of gains per person. Any business asset disposal relief or investors' relief you claim from 6 April 2027 would reduce that £10m limit.^2,7

HMRC's proposed conditions are narrow. The founder would need to have held at least 25% of the shares from when the business started trading, kept them for at least five years, and been UK resident for the five tax years before the sale. The company would need turnover of at least £10m and at least 15 full-time employees in the year before the sale, and to pass two of three tests: 25% a year growth in turnover, 25% a year growth in staff numbers, or at least £1.5m of research and development spending. HMRC is consulting on these conditions until 30 November 2026, so they may change.^2,7

Malli Kini of Blick Rothenberg called it "a bold and welcome move", but warned that "the devil will be in the detail", and that narrow conditions could leave long-standing family businesses worse off.⁶

What it could mean on a £2m sale

Take an owner selling qualifying shares for a £2m gain, with no relief used before. Ignoring the £3,000 annual exemption:

• Selling before 6 April 2027, the tax is £420,000 (£180,000 at 18% plus £240,000 at 24%).
• Selling after that date with business asset disposal relief, the tax is £450,000 (£90,000 at 18% plus £360,000 at 24%).
• If the whole gain qualified for Founders' Relief, the tax would be £200,000.

These are illustrations using the published rates.^1,4 The real figure depends on your base cost, how the deal is structured and your other income.

Timing a business sale

For capital gains tax, a sale under an unconditional contract happens when the contract is made, not when the deal completes. If the contract is conditional, it happens when the conditions are met.⁸ The Budget documents say there will be special rules for contracts made before 6 April 2027 that haven't completed by then, and for some share reorganisations.⁹ The detail hasn't been published yet. When capital gains tax rates changed in October 2024, similar rules meant some contracts made before Budget day, but not yet completed, were taxed at the new rates.¹⁰ So don't rely on the timing of a contract until the final rules are out.

Rushing a deal has its own cost. A lower price or weaker terms agreed to hit a date can lose more than the tax saved. Earn-outs and deferred payments need particular care, because how they're taxed depends on how the deal is written.

Owners selling to an employee ownership trust should also know that the relief there was cut from 100% to 50% for sales on or after 26 November 2025.¹¹

Selling isn't the only option

Some owners would rather pass shares to the next generation. Since 6 April 2026, 100% business property relief from inheritance tax is capped at £2.5m per person, with 50% relief above that, and the Budget didn't change this.^1,12 Our inheritance tax and estate planning pages explain how we help with this. For everything else in the Budget, see our Autumn Budget 2026 summary.

What to do now

Check you meet the conditions today. Two things to watch are new shares taking your holding below 5%, and stepping down as a director or employee before the sale.⁵ If a sale is likely in the next year or so, talk to your accountant and solicitor about whether it will happen before or after 6 April 2027, and keep an eye on the Founders' Relief rules when they're published.

We work with business owners on planning an exit and what to do with the proceeds, alongside their accountant. To talk through your position, book a consultation. The first meeting is at our cost.

Business asset disposal relief: common questions

Can I still use the £1m limit if I sell before April 2027?

The £1m limit applies to disposals up to 5 April 2027, and the £500,000 limit from 6 April 2027.¹ For an unconditional contract, the disposal date is the date the contract is made.⁸ The final legislation will include special rules for contracts made before 6 April 2027 but completed after it, so check those before relying on this.⁹

Does Founders' Relief replace business asset disposal relief?

No. Both will exist from 6 April 2027: business asset disposal relief at 18% on up to £500,000 of lifetime gains, and Founders' Relief at 10% on up to £10m for those who qualify.^1,2

Sources

Sources checked on 28 October 2026.

1. HMRC, Budget 2026: Annex A, rates and allowances, 28 October 2026.
2. HMRC, Founders' Relief: technical consultation, 28 October 2026.
3. HMRC, HS275 Business Asset Disposal Relief (2026).
4. HMRC, Capital Gains Tax rates and allowances.
5. GOV.UK, Business Asset Disposal Relief: eligibility.
6. City AM, Budget 2026: Healey reduces threshold for Business Asset Disposal Relief, 28 October 2026.
7. HM Treasury and HMRC, Capital Gains Tax: Founders' Relief, technical consultation, 28 October 2026.
8. HMRC, Capital Gains Manual CG14261: date of disposal, contracts.
9. HMRC, Budget 2026: Overview of tax legislation and rates, sections 1.32 and 1.33, 28 October 2026.
10. HMRC, Capital Gains Tax: rates of tax, 30 October 2024.
11. GOV.UK, Capital Gains Tax: Employee Ownership Trusts.
12. GOV.UK, Agricultural property relief and business property relief changes, updated 3 March 2026.