What do Business Asset Disposal Relief changes mean for exit planning?

What do Business Asset Disposal Relief changes mean for exit planning?

From 6 April 2026, Business Asset Disposal Relief rates will change again, which means planning a Members’ Voluntary Liquidation before the 2026/27 tax year may be more tax efficient for your clients.

What is Business Asset Disposal Relief?

Business Asset Disposal Relief (BADR), formerly Entrepreneurs’ Relief, is a significant tax relief available to eligible business owners and entrepreneurs. It reduces Capital Gains Tax liability
when extracting funds through a Members’ Voluntary Liquidation and can generate considerable tax savings. If your client qualifies for BADR, the upcoming changes will impact their exit plans.

From April 2026, the tax relief available through BADR is set to change, so how will this impact exit planning for clients?

Structuring a planned exit

Clients considering a structured exit must seek professional guidance from a licensed insolvency practitioner to maximise their tax savings ahead of April 2026. Early planning can provide ample time to structure a tax-efficient exit and enter a Members’ Voluntary Liquidation before the tax changes in April.

What is a Members’ Voluntary Liquidation (MVL)?

An MVL is a formal liquidation procedure to wind up a solvent company, controlled by a licensed insolvency practitioner. It is a popular exit route for cash-rich companies as it is often more
tax-efficient than extracting profits via dividends and income and dissolving the company.

Through a Members’ Voluntary Liquidation, distributions are treated as capital and, therefore, subject to Capital Gains Tax, rather than income tax. BADR provides further tax relief and unlocks a reduced rate of Capital Gains Tax if your client qualifies. BADR is a key component that shapes the tax efficiency of a Members’ Voluntary Liquidation.

How will Business Asset Disposal Relief change in April 2026?

From 6 April 2026, the Capital Gains Tax rate available under BADR will increase from 14% to 18%. An MVL will continue to offer a tax-efficient exit post-April 2026, albeit at a reduced rate due to a higher tax liability for clients. If your client is considering a business exit, we advise early planning to maximise the full range of tax relief available before the tax changes in April 2026.

Further information

For professional advice on what the incoming changes to Business Asset Disposal Relief mean for exit planning, speak with your local licensed insolvency practitioner at BTG Begbies Traynor Group.