Will Business Asset Disposal Relief Be Scrapped

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We wrote these guides for people running a company who want clear answers on tax, payroll, Companies House duties, and day to day compliance without jargon. Our aim is to help you understand your responsibilities, reduce the risk of penalties, and know when to get professional support.

Business Asset Disposal Relief (BADR) is one of the most discussed parts of the UK capital gains tax system. Its future has been debated over successive Budgets, driven by government budget pressures, broader tax reform ambitions, and questions about the relief’s value for growth and entrepreneurship. Directors, business owners, and advisers routinely ask the same question: is BADR going to be scrapped altogether?

In this article I explain what BADR is, how it has changed over time, what the current position is, the arguments for and against its abolition, what policy proposals are being discussed, and what business owners should be thinking about now. I also set out practical planning considerations for those who may benefit from the relief in future years.

What Business Asset Disposal Relief actually is

Business Asset Disposal Relief was formerly called Entrepreneurs’ Relief. It was introduced in April 2008 and later renamed BADR in the 2020 Budget. The relief is designed to reduce the capital gains tax payable by individuals making qualifying disposals of business assets or shares in their business.

Under current rules, individuals can benefit from:

• A reduced CGT rate on qualifying business disposals

• A lifetime limit on qualifying gains that can attract the relief

The basic mechanism is that, if you dispose of qualifying business assets, you pay tax at a lower rate on the first part of your gain up to a lifetime cap. This lower rate used to be set at 10 per cent, with the higher rate for gains over the lifetime limit or outside the relief being 20 per cent for most assets. GOV.UK

BadR is only available to individuals, not companies, and it has specific qualifying conditions including rules about how long the business has been owned and the nature of the business. GOV.UK

How BADR has changed over the years

BADR has changed a lot since it was first introduced:

• When introduced in 2008, BADR (then Entrepreneurs’ Relief) had a very generous lifetime limit of £1 million.

• Over subsequent years the lifetime allowance was increased to £2 million, £5 million, and then £10 million.

• In March 2020 the lifetime limit was drastically reduced to £1 million. GOV.UK

More recently, tax rates and conditions have continued to evolve. The standard capital gains tax system has been rebalanced, and reliefs like BADR have been under pressure because of fiscal constraints on the public finances and debates about tax policy. Slater Heelis

These changes show that BADR is not static. It has been reduced and reshaped over time, and this context feeds into ongoing questions about whether it will survive in its current form.

What the law says today

At the time of writing:

• BADR remains part of the capital gains tax system.

• Qualifying gains attract a reduced CGT rate on disposal.

• The lifetime limit and qualifying conditions still apply. GOV.UK

Recent changes from fiscal events include:

• From 6 April 2025, the reduced rate on qualifying gains increased from 10 per cent to 14 per cent.

• From 6 April 2026, the BADR rate is set to rise again to 18 per cent, in line with wider capital gains tax rate changes. Slater Heelis+1

Importantly, these changes were made without abolishing BADR. The Government chose to keep the relief but to adjust how generous it is by aligning its rate with broader capital gains tax reforms.

This highlights a key point: BADR has not been scrapped and current law anticipates it remaining at least until the scheduled rate change in 2026.

Why some commentators think BADR might be scrapped

There are several reasons commentators and advisers have speculated that BADR could be scrapped at some point in the future:

• BADR is an expensive relief from the Exchequer perspective, and some believe it may not offer value for money when measured against the budget cost.

• Critics argue that its cost could be directed to other priorities or simpler tax measures.

• Labour and other tax policy commentators have suggested broad capital gains tax reform, potentially removing preferential reliefs. Tax UK+1

In some media coverage and advisory commentary you will still see speculation about BADR’s future, with words like “expected to be scrapped” being used in headlines or budget previews. Tax UK

However this speculation should be treated with caution until the Government actually introduces a proposal in legislation.

Why the Government has not yet scrapped BADR

If BADR were simply abolished without replacement, it would remove the reduced CGT rate for qualifying business disposals entirely. That would have several consequences:

• It could discourage entrepreneurship if owners feel they face a heavy tax bill on exit.

• It might reduce the after tax incentives for founders selling their business.

• It would change the investment landscape for those planning retirement through sale of business assets.

The Government appears to value the principle of supporting business owners and entrepreneurs, even if they adjust how reliefs work. The approach taken in recent Budgets was to keep the relief but adjust the tax rate applicable rather than removing it entirely. Slater Heelis

The difference between “being scrapped” and “being reduced”

It is worth making a clear distinction between BADR being scrapped entirely and BADR being reduced or modified.

Abolition would mean the relief no longer exists in any form and qualifying gains were taxed at standard CGT rates.

By contrast, recent changes have:

• Increased the rate at which qualifying gains are taxed

• Kept qualification conditions and lifetime limits in place

• Retained the core structure of the relief

This suggests that the Government has chosen modification over removal. Slater Heelis

From a policy perspective, this is a recognition that there is still a role for targeted relief for business disposals, even if the overall CGT regime shifts.

What the broader tax context looks like

The debate about BADR sits within a wider conversation about capital gains tax reform in the UK. There have been repeated calls from think tanks, commentators, and parts of the media to reframe the UK CGT system, including aligning rates with income tax or reassessing reliefs generally. Institute for Fiscal Studies

However, nothing in law binds future governments to abolish BADR without an explicit statutory change. Within the last couple of fiscal events, the Government did not use its budgetary powers to abolish the relief, instead tweaking it for revenue purposes. Slater Heelis

At the time of writing there is no confirmed legislative proposal to abolish BADR entirely.

Political and policy pressures

Policy direction can change with political leadership. Historically BADR has been supported by successive governments as a way of encouraging enterprise and rewarding founders.

Under different political circumstances, targeted tax reliefs may come under review as part of broader tax strategies.

What matters for directors and business owners is to distinguish between policy debate and actual law. Commentators may suggest BADR is likely to be scrapped, but unless a Budget or Finance Bill introduces a statutory repeal, it remains active.

Practical implications of potential abolition

Directors and owners should consider what it would mean if BADR were scrapped in the future. From a planning point of view:

• The timing of exits could become more important if BADR were due to be removed.

• You might consider whether accelerated disposals make sense in light of scheduled rate changes.

• Lifetime limits already affect planning and should be factored into ongoing strategy.

Abolition might lead to increased tax bills on disposal of business assets and shares, with gains taxed at the main capital gains rates. This could significantly impact retirement planning, succession planning, and exit strategies.

What to do now as a business owner

Whether or not BADR is eventually scrapped, there are practical steps you can take to manage this risk:

• Stay informed on Budget announcements and tax policy consultations.

• Build BADR considerations into your exit planning early, particularly if you have qualifying gains approaching the lifetime limit.

• Speak to a tax adviser before disposal, because planning can materially affect how much relief you benefit from.

• Document qualifying periods and conditions thoroughly so that if relief remains available you can substantiate a claim. GOV.UK

Common misconceptions about BADR

There are a few misunderstandings that frequently come up:

• BADR is often thought to be permanent tax law. In reality it exists because statute says so, and statute can change.

• Some think BADR applies to companies. It does not. It applies to individuals making disposals of business assets or shares. GOV.UK

• Others believe that because BADR remains in the tax code now it will always remain. Tax law is subject to change, but there is no current plan to abolish it outright.

BADR in the context of wider reliefs

While BADR applies to disposals by individuals, companies themselves can benefit from different reliefs such as:

• Substantial shareholdings exemption (for corporates)

• Rollover and reinvestment reliefs in certain circumstances

These are separate from BADR, and changes to BADR do not necessarily impact these other reliefs. Wikipedia

Final thoughts

So, will Business Asset Disposal Relief be scrapped?

At present the relief remains part of UK tax law. Recent changes have increased the rate at which qualifying gains are taxed and scaled back some of the generosity of the regime, but the relief itself has not been abolished. Slater Heelis+1

There is ongoing speculation about tax reform and broader capital gains tax changes, but nothing in current legislation confirms an outright scrapping of BADR. For business owners, the sensible approach is to plan for potential changes, stay informed, and treat BADR as an important component of exit and succession planning rather than something you can simply count on indefinitely.

If you are considering selling your business or realising gains, speak to your accountant or tax adviser early. Legislative change can happen quickly, and early planning helps you manage risk and capture relief while it remains available.

You may also find our guidance on how do you sell a business and how to value a business helpful when exploring related limited company questions. For a broader overview of running and managing a company, you can visit our limited company hub.