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For many business owners, selling a company represents the culmination of years, and often decades, of hard work. Building value is only part of the equation, however. How and when that value is ultimately realised can make a significant difference to the wealth an owner takes away from a sale.
The 2026 Budget contained some important changes for business owners contemplating an exit, including a reduction in Business Asset Disposal Relief (BADR) and the proposed introduction of a new Founders’ Relief.
While tax should rarely be the sole driver of a decision to sell a business, the announcements provide another reminder of why planning for an exit should begin well before a transaction is on the table.
Business Asset Disposal Relief is becoming less generous
Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, can reduce the Capital Gains Tax (CGT) payable when qualifying business owners sell all or part of their business.
The rate applying to qualifying disposals is now 18% from 6 April 2026. At present, qualifying gains are subject to a £1m lifetime limit.
The Budget announced a further change, with the lifetime limit reducing from £1m to £500,000 from 6 April 2027.
For an owner contemplating a sale, this makes understanding the timing and structure of a potential transaction increasingly important. Individual circumstances will differ, and business owners should take specialist tax advice before making decisions based on the availability of a particular relief.
A new relief for founders
Alongside the reduction in BADR, the government announced plans for a new Founders’ Relief, aimed at those who started businesses and significant early investors in high-growth, innovative UK companies.
Under the proposals, individuals could benefit from the following on qualifying disposals taking place on or after 6 April 2027:
- a 10% rate of CGT on qualifying share disposals;
- a lifetime allowance of up to £10m of eligible gains per individual.
On the face of it, this could be a valuable new relief for some entrepreneurs. However, the qualifying criteria are deliberately targeted.
Current proposals include a requirement for an individual to have held 25% of the ordinary share capital when the company's trading activity, or preparations for that trade, began. Also, shares or securities would need to have been held for at least five tax years, and the individual would need to have been a UK resident for at least five continuous tax years before disposal.
The business itself would also need to meet qualifying conditions around its size, growth and innovation, including demonstrating sustained growth in turnover or employee numbers, or qualifying R&D activity.
The legislation has not yet been finalised and the government is consulting on the detailed individual, company, growth and innovation conditions. The technical consultation is due to close on 30 November 2026, with legislation expected through Finance Bill 2026/27.
Why planning ahead matters
The contrast between the two announcements is interesting.
BADR is becoming less generous, while a potentially much more valuable 10% CGT rate is being proposed for a narrower group of business owners who meet more demanding conditions.
In both cases, the important message for business owners is the same: the tax position on an eventual sale is something to understand well before the sale process begins.
But tax is only one part of preparing for an exit.
An owner approaching a liquidity event may also need to consider:
- How much is enough? Understanding what the proceeds from a sale need to provide for you and your family over the long term.
- When should you sell? The highest offer is not automatically the right answer if the structure, timing or conditions do not fit your personal objectives.
- What happens to the proceeds? A business owner can move very quickly from having most of their wealth concentrated in a company they understand intimately to holding a significant amount of cash.
- How should family wealth be structured? An exit can create an opportunity to think about children, inheritance, gifting and longer-term family objectives.
- What comes next? For many entrepreneurs, the transition from building a business to life after a sale can be every bit as important as the transaction itself.
These questions are interconnected. Decisions made before a sale can have consequences long after the transaction has completed.
Start with the destination
When a potential exit appears distant, detailed personal planning can easily be put off. The immediate priorities are normally customers, employees, investment and growing the value of the company.
Yet preparing early provides something valuable: choice.
Understanding what you want from an eventual exit, how much capital you may need and what you want that wealth to achieve can help provide a clearer framework for decisions about the business itself.
The latest changes to BADR and the proposed Founders’ Relief add a further dimension to that conversation.
If you are considering selling your business in the coming years, starting the conversation early can help you understand what an exit could mean for you and your family. Speak to Quilter Cheviot about how we can help you plan for the transition, working alongside your existing advisers and, where needed, connecting you with the right tax, legal and corporate finance expertise.
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