Budget 2026: Healey Reduces BADR Limit to £500,000
Chancellor John Healey halved the lifetime limit on Business Asset Disposal Relief from £1m to £500,000 and announced a new 10 per cent Founder's Relief on…
Chancellor John Healey has cut the lifetime limit on Business Asset Disposal Relief (BADR) in capital gains tax from £1m to £500,000, in a Budget that also introduced a new, lower tax rate for company founders. Under the Budget 2026 plan, Healey reduces the threshold for business owners selling up, and the change takes effect from April 2027.
Healey said the move will mean "no changes for three in four claimants". Industry figures were less convinced and criticized the cut, arguing it leaves qualifying business owners much worse off.
What changes for business sellers
Under current rules, BADR cuts the capital gains tax bill on selling a business, with a rate of 18 per cent applying to up to £1m of gains over a lifetime. That rate has been raised twice in the past two years. It rose to 14 per cent in April 2025, then to 18 per cent last year under former chancellor Rachel Reeves.
Michael Carter, Partner and Head of Incentives at Osborne Clarke, said the Chancellor had "delivered something of a mixed message for entrepreneurs". He said the relief had been cut back again, leaving qualifying owners able to save a maximum of just £30,000 in capital gains tax over their lifetime under the existing relief.
Nimesh Shan, chief executive of Blick Rothenberg, was blunter. He said the reduction "makes little sense" and argued Healey should have "abolished it completely".
A new Founder's Relief
Alongside the cut, Healey unveiled a new capital gains tax relief, dubbed Founder's Relief, aimed at keeping companies operating in the UK. It sets a 10 per cent rate on lifetime gains of up to £10m "for the founders of our most successful firms".
The Chancellor framed it as a reward for risk-taking. "I know that starting a company means taking risk. Leaving a secure job to build something with no guarantee that it will work," he said. He added that when founders build an exceptional company and create wealth for Britain, "we should recognise that success and keep those people here to invest again".
Advisers question the detail
Malli Kini, partner at advisory firm Blick Rothenberg, called the new relief on the first £10 million of gains "a bold and welcome move" that could make the UK a far more attractive place to start and grow a business. She said it would go some way to softening the blow of halving the BADR limit.
Her warning followed. If the qualifying conditions are too narrow, Kini said, many long-standing family businesses and smaller owner-managers will be worse off overall, while the benefit goes mainly to venture-backed start-ups.
Will Dowsett, UK private business tax leader at PwC, said the proposed eligibility criteria "remains onerous". He pointed to conditions on ownership, turnover, employees, growth and research and development expenditure, all of which add complexity and are subject to consultation.
Dowsett also said the plan takes the system back towards territory seen under the old Entrepreneurs' Relief regime. In his view there is a risk that continual changes to the reliefs around business ownership add complexity, when what entrepreneurs often value most is a tax system that is "stable and predictable".
The eligibility conditions for Founder's Relief are subject to consultation.
Source: cityam.com
