UK Autumn Budget - Business Asset Disposal Relief changes

UK Autumn Budget 2026 announced a change to Business Asset Disposal Relief (BADR) that will be particularly relevant to shareholders considering the solvent closure of a company through a Members’ Voluntary Liquidation (MVL).

From 6 April 2027, the Government proposes to reduce the BADR lifetime limit from £1 million to £500,000 of qualifying gains per individual. Qualifying gains are currently subject to Capital Gains Tax (CGT) at 18%, while gains that do not qualify for BADR are subject to the normal CGT rules, currently at rates of up to 24%.

James Neill

Partner, Head of Turnaround and Restructuring - NI

KPMG in Ireland

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What is changing?

The BADR lifetime limit is currently £1 million per individual. Under the changes announced at UK Autumn Budget 2026, this will reduce to £500,000 for qualifying disposals made on or after 6 April 2027. The proposed change is expected to be introduced through the Finance Bill 2026.

Importantly, the lifetime limit takes account of BADR previously claimed. Shareholders who have already used some or all of their lifetime allowance will therefore need to consider their individual position when assessing the potential impact of the changes.

What could this mean for shareholders?

The reduction in the lifetime limit could increase the CGT payable by shareholders with qualifying gains above £500,000.

For example, an individual with £1 million of qualifying gains and their full existing BADR lifetime allowance available could potentially face up to £30,000 of additional tax following the reduction in the limit. Assuming the current rates continue to apply, the first £500,000 would qualify for BADR at 18%, with the remaining £500,000 subject to CGT at up to 24%. The 6% difference on £500,000 equates to £30,000.

The actual tax position will depend on each shareholder’s individual circumstances, including their eligibility for BADR and any lifetime allowance previously utilised.

Why is this important for an MVL?

For shareholders considering an MVL, timing will be important.

An MVL is a formal process used to wind up a solvent company and distribute its remaining assets to shareholders. Where the relevant conditions are satisfied, distributions made through an MVL can be treated as capital distributions, meaning BADR may be available subject to the shareholder meeting the applicable qualifying conditions.

For shareholders seeking to access the current £1 million BADR lifetime limit, qualifying distributions would need to be made before the new limit takes effect on 6 April 2027. Therefore, placing a company into liquidation before 6 April 2027 will not, in itself, secure access to the existing £1 million lifetime limit. The timing of distributions to shareholders will also need to be carefully considered.

Planning ahead

Preparing a company for an MVL can involve a number of steps before funds are available for distribution to shareholders. Businesses considering a solvent closure should therefore start planning well in advance of 5 April 2027.

Businesses contemplating a solvent closure should therefore consider their plans well in advance of the 5 April 2027 deadline, particularly where shareholders may have material qualifying gains. Early planning can provide time to consider the company’s position, the practical steps required to implement an MVL and, importantly, the individual tax circumstances of its shareholders.

Shareholders should take appropriate tax advice regarding their eligibility for BADR and the availability of their lifetime allowance.

How KPMG can help

KPMG’s Turnaround & Restructuring team can assist businesses and shareholders with planning for and implementing an MVL.

With the proposed BADR changes due to take effect from 6 April 2027, early consideration of a solvent wind-down may be particularly important for shareholders who could be affected by the reduced lifetime limit.

Speak to your KPMG adviser to discuss the options available for your business and shareholders.