September 2026
BADR at 18% from April 2026: What the Rate Change Actually Costs You
James Dixey
Founder and Managing Director
James Dixey — Founder and Managing Director · 6 min read · James Dixey Limited
EXECUTIVE SUMMARY
The maximum additional tax is £40,000 per qualifying shareholder. BADR rised from 14% to 18% on 6 April 2026 [1]. On a fully qualifying £1m gain, the rate step-up costs £40,000. For a couple with two qualifying shareholdings, the ceiling is £80,000 -regardless of whether the total gain is £2m or £20m.
Above the £1m lifetime allowance, the rate change is irrelevant. Gains above the allowance are taxed at the standard CGT rate of 24% [2]. On a £5m gain, only the first £1m attracts BADR; the remaining £4m was always going to 24%.
BADR planning that pays off happens 12–24 months before sale, not in the final quarter. Allowance-spreading across qualifying family shareholders, qualifying-period compliance and earn-out structuring all need lead time and a specialist tax adviser working alongside the M&A process.
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What changed and when
The Spring Budget 2024 set out a two-step BADR rate path. The relief moved from 10% to 14% on 6 April 2025, and rised from 14% to 18% on 6 April 2026 [1]. The £1m lifetime allowance per qualifying shareholder is unchanged. Above the allowance, gains attract the standard CGT rate of 24% [2].
That is the change. Everything else is commentary.
Nothing here is tax advice. If you are planning an exit, the conversation that matters is with a qualified corporate tax specialist looking at your specific shareholding, qualifying periods and personal position. What follows is the M&A view on whether the rate change should be driving your timing.
What the four-point uplift actually costs
The arithmetic is simple, and worth doing on the back of an envelope before anyone tells you the sky is falling.
On a £1m qualifying gain: BADR at 14% costs £140,000. At 18% it costs £180,000. Difference: £40,000.
On a £3m gain: the first £1m sits within the allowance. The remaining £2m is taxed at 24% either way. Additional tax from the step-up: £40,000.
On a £5m gain: same again. £40,000.
On a £10m gain: £40,000.
The maximum additional tax from the April 2026 step-up is £40,000 per qualifying shareholder, or £80,000 for a couple with two qualifying shareholdings.
On a £5m enterprise value transaction, £40,000 is 0.8% of headline price. On a £10m deal, 0.4%. Real money, but not the number that should be driving a once-in-a-lifetime decision.
Why rushing to beat the deadline rarely paid off
We saw this film last year. The 6 April 2025 step-up triggered a wave of owners trying to complete before the deadline. Some made it. Many didn’t, and of those who did, a meaningful proportion left money on the table that exceeded the tax they saved by a multiple.
The reason is mechanical. A well-run sale in the regulated sectors we cover takes 6–9 months from instruction to completion, plus the 12–16 week CQC (Care Quality Commission - the UK regulator for adult social care and healthcare providers) change-of-provider window in care. Inside that window, the preparation work - clean financials, defensible add-backs, a properly written IM, a curated buyer list, competitive tension - is what produces price. Compress the timeline and you compress the preparation. That shows up in the bids.
Christie & Co reported the same deadline effect from the buyer's side. Their 2025 nursery market review found that the April 2025 BADR increase had "undoubtably contributed" to a buoyant first half, and they expected the April 2026 step to produce an unusually busy Q1 [3]. That is a lot of vendors arriving at market at the same time, many of them with less preparation than they would otherwise have had. In the processes we saw, that showed up as thinner buyer lists, weaker add-back support and less competitive tension at the bid stage. The arithmetic is unforgiving: a 0.5x multiple difference on a £5m EBITDA business is £2.5m. The tax saved by completing two months earlier was £40,000. The maths is rarely close.
The honest framing: if your business is genuinely ready to sell - clean financials, regulatory file in order, management bench in place, buyer universe identified - the rate change is a useful nudge. If it isn’t ready, the rate change is a distraction dressed up as a deadline.
Pre-sale BADR planning that does pay off
Real planning is available on a 12–24 month horizon, not a six-week one.
The most common lever is allowance-spreading. Where a spouse or adult child holds qualifying shares for the required period (24 months of qualifying ownership and officer or employee status), each qualifying shareholder has their own £1m allowance. For a married owner, that potentially doubles the BADR-relieved portion of the gain - worth up to £60,000 versus the standard 24% rate.
That structuring needs to be in place well before the sale process starts. Gifting shares the month before completion does not work. The qualifying period is real, HMRC scrutinises it, and the relief can be denied retrospectively where conditions are not cleanly met.
Earn-out and deferred consideration mechanics are the second area where pre-sale thinking matters. Where part of consideration is contingent on future performance, the BADR treatment depends on the structure - loan notes, contingent right to cash, or earn-out shares all behave differently. The wrong structure can push contingent consideration outside the relief altogether.
This is where a corporate tax specialist working alongside your M&A adviser earns their fee many times over. We work with several we trust and will introduce you on a confidential basis.
When BADR is irrelevant
For some routes, the rate change doesn’t matter at all.
Equity rollover. Where a private-equity buyer requires management to roll a portion of consideration into the new HoldCo, the rolled equity isn’t a chargeable disposal. The CGT clock only starts on the eventual second exit.
Employee Ownership Trusts. Until November 2025 a qualifying sale to an EOT was free of CGT altogether. The Autumn Budget 2025 halved that relief: for disposals on or after 26 November 2025, 50% of the gain is exempt and the other 50% is taxed at the 24% higher rate, with no BADR available on the taxable half [4]. That gives an effective rate of up to 12% on the whole gain, with no £1m cap. Set against 18% on the first £1m and 24% on everything above it, an EOT still carries a clear tax advantage, and it is one that grows with the size of the gain. For owners where succession and continuity matter more than maximising headline price, EOTs remain a serious option, and the BADR rate change has no bearing on them.
Above the £1m allowance. Only the first £1m of gain attracts BADR. If your gain is materially above that, the rate change moves a small dial on a large number.
What to do if you’re already in a process
If you are 12 months out, plan for completion when the business is genuinely ready. A well-prepared sale at 18% BADR is, in almost every case I have seen, a better outcome than a rushed sale.
Related: The Twelve-Month Exit Checklist.
Want to pressure-test whether your business is ready to sell in 2026?
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SOURCES
[1] HM Treasury, Autumn Budget 2024 (30 October 2024). Business Asset Disposal Relief rate path: 10% to 14% from 6 April 2025; 14% to 18% from 6 April 2026. HMRC technical guidance, Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), gov.uk.
[2] HMRC, Capital Gains Tax rates and allowances, gov.uk. Higher-rate CGT on chargeable assets: 24% from 30 October 2024.
[3] Christie & Co, Childcare & Education Market Review 2025 (press release, 9 July 2025): Autumn Budget 2024 BADR increase cited as a driver of H1 2025 nursery deal activity, with a busy Q1 2026 anticipated ahead of the April 2026 step-up. Christie & Co, Care Market Review 2025 (17 September 2025), record UK care home transaction volumes.
[4] HM Treasury, Autumn Budget 2025 (26 November 2025); HMRC, Employee Ownership Trusts guidance, gov.uk. CGT relief on qualifying disposals to an EOT reduced from 100% to 50% for disposals on or after 26 November 2025; Business Asset Disposal Relief not available on the chargeable portion.
James Dixey Limited — Specialist M&A for regulated, owner-managed businesses in Care, Education, Safety & Compliance and Other Regulated Services.
This article reflects conversations I'm having with clients and is not intended as tax advice. Always consult a qualified accountant or tax adviser about your specific circumstances.
