Capital Gains Tax 2026/27: BADR Rising to 18% — Act Before 6 April

The Autumn Budget 2024 Changes Are Nearly Complete

When Rachel Reeves delivered the Autumn Budget in October 2024, capital gains tax was one of the headline areas of change. The main CGT rates on non residential assets moved immediately, rising from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers, aligning with the longstanding residential property rates. Business Asset Disposal Relief was handled differently: a two stage increase, with the rate moving from 10% to 14% from 30 October 2024, and then from 14% to 18% from 6 April 2026.

That second step is now just weeks away. For anyone with a qualifying disposal in progress or under consideration, the arithmetic of timing has become very straightforward.

What BADR Actually Does

Business Asset Disposal Relief (called Entrepreneurs' Relief until 2020) applies a reduced CGT rate to qualifying disposals of business assets, up to a lifetime limit of £1 million of gains. Above that limit, gains are taxed at the standard CGT rates.

To qualify for share disposals, the taxpayer must have held at least 5% of the ordinary shares and voting rights for a continuous period of at least two years ending on the date of disposal. They must also have been an employee or director of the company throughout that period. For the disposal of a sole trade or partnership business, the individual must have owned the business for at least two years.

The detail matters. BADR is not automatic, and HMRC does challenge claims where the qualifying conditions are not clearly met.

The Rate Progression in Numbers

On a gain of £500,000 within the lifetime limit, the tax liability at the original 10% rate was £50,000. At 14% (the current rate until 5 April 2026), it is £70,000. At 18% (from 6 April 2026), it will be £90,000. The difference between completing a disposal before 6 April 2026 versus after is £20,000 on a £500,000 gain, purely as a function of timing.

For gains at the full £1 million lifetime limit, the difference is £40,000. That is not an insignificant sum, and for business owners who have been planning an exit, it is a compelling reason to take advice now on whether acceleration is feasible.

The Annual Exempt Amount

The annual CGT exempt amount remains frozen at £3,000 for 2026/27. This is a sharp reduction from the £12,300 that applied as recently as 2022/23 and means that a much greater proportion of capital gains now fall within the charge to CGT. For individuals with mixed portfolios, investment properties, or share holdings outside an ISA, the reduced exempt amount means that disposal planning has become more important across the board.

What Counts as a Disposal for Timing Purposes

For share sales, the disposal date is generally the date of exchange of contracts, not completion. If exchange and completion fall in different tax years, it is the exchange date that determines which rate applies. This means that for a disposal where exchange of contracts can be completed before 6 April 2026, even if funds do not change hands until after that date, the 14% BADR rate should apply.

The practical window for using the lower rate is defined by whether you can reach exchange before 6 April, not by when heads of terms were agreed or when completion is scheduled.

The Broader CGT Picture

The alignment of main CGT rates with residential property rates from 2026/27 means that, outside of qualifying BADR disposals, there is no longer a preferential rate for most business and investment assets. The 18% basic rate and 24% higher rate now apply across the board. Annual portfolio reviews to consider the use of bed and ISA strategies, spousal transfers, and the annual exempt amount have become more financially significant.

The Capital Gains Tax Calculator from MBridge handles the current rate structure for all three tax years (2024/25, 2025/26, 2026/27), applies the correct rate based on your income band, accounts for the annual exempt amount, and applies BADR at the appropriate rate for qualifying disposals. Running a current year and next year comparison before 6 April is straightforward and worth doing.

A Practical Note on Timing

Six weeks is not a long time to complete a business sale or major asset disposal. But for transactions already in progress, it is worth having an explicit conversation with your solicitor and tax adviser about the exchange date and what is needed to achieve it before 6 April. The tax saving at stake will in many cases more than cover the cost of expediting legal work.

The relief still exists and still provides a meaningful discount. At 18% compared with 24% for higher rate taxpayers, BADR saves 6 percentage points on qualifying gains up to £1 million, a maximum saving of £60,000. Preserving eligibility through careful planning remains worthwhile even at the higher rate.