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The Tax On Selling Your Business Has Risen From 10% To 18%

ended 07. July 2026

For years, selling the business you built came with a reward: the first £1 million of qualifying gains was taxed at just 10 per cent under Business Asset Disposal Relief (BADR), the relief formerly known as Entrepreneurs' Relief. That rate has climbed sharply. It was 10 per cent until 5 April 2025, rose to 14 per cent from 6 April 2025, and reached 18 per cent from 6 April 2026, where it now sits. That is an 80 per cent rise in the effective exit-tax rate in two years, and 2026/27 is the first full tax year at the 18 per cent rate.

The catch is what has not moved. The £1 million BADR lifetime limit has been frozen since 11 March 2020, so more of every sale now falls outside the relief just as the relief itself gets more expensive. Investors' Relief sits on the same escalator, rising from 10 to 14 to 18 per cent, and its lifetime limit was cut from £10 million to £1 million for disposals on or after 30 October 2024. Anti-forestalling rules mean an unconditional contract entered into before 6 April 2026 but completing on or after that date is still taxed at 18 per cent unless it meets the narrow "excluded contract" conditions, so a last-minute deal signed to lock in the old rate will not necessarily work.

The people caught are not the private-equity dealmakers, who plan around all of this. They are the retiring founder cashing in a lifetime's work, the owner-manager selling up to fund their pension, and the contractor closing down a company through a members' voluntary liquidation, many of whom still think the rate is 10 per cent.

  1. Business Asset Disposal Relief was meant to reward the people who build businesses. Is an 80 per cent rise in the exit-tax rate in two years a fair rebalancing, or a quiet raid on the very people the relief was designed to help?
  2. With the £1 million lifetime limit frozen since 2020 and the rate now at 18 per cent, who is hit hardest, and how many owners planning an exit do you think still believe the rate is 10 per cent?
  3. What should owners thinking about selling or retiring actually do now? Do you have a client whose exit plans this would change? If so, please give as much colour and detail as possible.

7 responses from the Newspage community

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Harvey Dhillon
Founder & CEO at Zmartly
Picture a founder who spent years building a company, then selling it, budgeting for the 10 per cent tax bill they were promised. That rate is gone. Business Asset Disposal Relief charges 18 per cent on the first £1 million of gains, up from 10 per cent before April 2025 and 14 per cent last year. On a full £1 million gain that is £80,000 more tax than two years ago, and the £1 million limit has been frozen since March 2020, so fiscal drag does the rest. The rate to sell your own business has risen 80 per cent in two years, and most owners still think it is 10 per cent. It does not hit the dealmakers, who plan around it, but the retiring owner-manager and the contractor closing a company. So model your exit at 18 per cent now, not on last year's guesswork, and take advice before you sign, because anti-forestalling shuts the escape route. What changed is not the sale price. It is the £80,000 more HMRC takes on the first million.
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Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
This is an astonishing way to treat the people ministers keep calling the backbone of the economy. Small business owners take the risk, create the jobs, pay the wages and often bet the house to build something. Then, when they finally sell or retire, the reward is an 80% rise in the BADR tax rate in two years and a lifetime limit frozen since 2020. That is not a pro-growth signal; it is a quiet raid on enterprise. The hardest hit will not be City dealmakers with armies of advisers, but founders, owner-managers and contractors who still think the old 10% rate applies. Anyone planning an exit needs proper tax advice now, not after heads of terms are signed. The real scandal is that Britain says it wants entrepreneurs, then makes the exit door more expensive every time they get near it.
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Mary Maguire
Managing Director at Astute Recruitment Ltd
This is an unfair tax on being an entrepreneur. An unfair tax on all the SME start up business owners who work many more hours than their staff. It's a tax on inspiration. A tax on those who risk everything to set up their own business. Instead of the current 'entrepreneur tax' we need an 'entrepreneur incentive' especially with the UK desperately needing growth. Lets hope the new incumbent in No.10 looks at this urgently!
SMEs are the lifeblood of the UK economy from an economic, jobs and growth perspective. Lets stop taxing inspiration and rewarding entrepreneurship!
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Graham Nicoll
Financial Planner, Chartered FCSI at NCL Wealth Partners
The increase in BADR from 10% to 18% materially changes the economics of exiting a business, particularly where the proceeds will fund retirement. Many owners still assume the rate is 10%, and with the £1m lifetime limit frozen, more gains now fall outside the relief. One client, a father in his early 60s whose two adult children work in his £4m family business, is weighing up selling to a third party or passing the business to his children. He's balancing higher CGT on sale against the changing IHT position if he retains ownership. Three priorities stand out: (1) model the after-tax outcome of sale versus succession, (2) review share ownership between spouses to maximise available allowances and support both sale and IHT planning, and (3) integrate business, pension and estate planning to deliver retirement income while preserving family wealth. Early planning creates far more options than waiting until a transaction is underway.
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Katrina Young
Futurist | Chief Technology Officer CTO/CDO Ethical AI & Digital Transformation Strategist at KYC Digital
The debate shouldn’t just be about what founders pay when they leave. It should be about what incentives we’re creating for the next generation of entrepreneurs. Most successful business owners don’t simply retire after an exit. Many reinvest into new ventures, back start-ups or build again. While it’s too early to know whether higher exit taxes will change that behaviour, they inevitably become part of the calculation when people decide whether years of personal risk are worth it. The founders least able to absorb these changes aren’t large investment funds. They’re owner-managed businesses whose company is effectively their pension and many who still assume Business Asset Disposal Relief is taxed at 10%. Owners planning an exit should model today’s rules, seek advice early and remember that tax policy doesn’t just shape how founders leave a business. It can also influence who decides to build one.
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Tony Redondo
Founder at Cosmos Currency Exchange
This government's empty rhetoric on economic growth is exposed by its latest wheeze, dreamt up by a group with zero private sector experience and, worse, no grasp that they operate under the public sector's magic money tree rather than real commercial risk. The BADR shift from 10% to 18% completely alters the maths of a UK business exit. The Treasury disingenuously frames it as fair alignment of capital and income tax. For founders, it's a raid atop the largest business tax rise in 50 years over the course of the last two budgets. BADR was designed to reward long-term risk and illiquidity, yet an 80% hike in two years penalises retiring owner-managers whose businesses are their pensions. Many owners still assume the old 10% rate applies, only discovering the truth during exit planning — a £1m gain now triggers £180,000 in tax, not £100,000. Owners must recalculate retirement targets, brace for longer working lives, or consider Employee Ownership Trusts, which offer tax-free sales.
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Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
An 80% rise in the exit-tax rate in two years sends a brutal message to Britain’s founders: take the risk, build the jobs, miss the holidays, hold the pressure — then hand over a bigger slice when you finally sell.

For many owner-managers, the business is not an “asset”. It is their pension plan, their family’s security and years of personal sacrifice made tangible. Yet the £1 million lifetime limit has been frozen since 2020 while the rate has climbed from 10% to 18%.

This will not catch the best-advised private-equity dealmakers. It will catch the founder who has spent 20 years building something, assumes the old 10% rate still applies and only starts planning once an offer arrives.

Paying tax is part of selling a business. But constantly moving the goalposts makes owners rush, delay or accept the wrong deal. An exit should be planned around value, timing and life after the sale — not fear of the next fiscal statement.