Selling your company to retire? What the Budget’s BADR cut could mean for you...

For an owner-manager, selling company shares can mark the end of years of hard work and the start of retirement. The important figure is not simply the price agreed with the buyer, but what remains after tax, costs and any amounts held back under the sale agreement.

The UK Budget 2026 announcement proposes reducing the lifetime limit for Business Asset Disposal Relief (BADR) from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. For shareholders relying on a sale to fund retirement, that makes a review of the exit plan particularly timely.

What has been announced?

BADR, formerly known as Entrepreneurs’ Relief, provides a reduced Capital Gains Tax (CGT) rate on qualifying business disposals, including certain sales of company shares. The current BADR rate is 18%. The announced change reduces the amount of qualifying gains eligible for that rate, rather than changing the rate itself.

The limit applies to qualifying gains—not the total sale price—and is a lifetime limit for each individual, not an allowance for each transaction. Previous gains on which relief has been claimed count towards the limit. A seller who has already used their allowance may therefore have little or no relief remaining under the reduced cap.

At the date of this article, HMRC describes the reduction as a measure to be introduced in the Finance Bill 2026. It should therefore be treated as an announced change, subject to the final legislation.

Why does this matter for retirement?

A higher tax bill can leave less capital available for retirement. It is sensible to revisit the amount you expect to receive, when you will receive it, and whether it will meet your longer-term needs. A headline offer may include deferred payments or an earn-out that depends on future performance, rather than cash available when you step away.

Retirement itself does not qualify a share sale for BADR. The relief depends on the relevant ownership, employment and company conditions. In particular, stepping down as a director or employee before a sale can put eligibility at risk, so the order of your retirement and sale arrangements should be checked before you act.

If you are thinking about planning for a future retirement/sale it is always sensible to take specialist tax advice to assist you to make the right decisions ahead of your retirement and sale of your business.

A worked example: the impact on a share sale

Suppose a shareholder realises a £1 million taxable gain on a qualifying share sale, has made no previous BADR claims and pays 24% on any gain outside BADR. This simplified illustration treats the gain as already calculated after allowable costs, losses and the annual exemption, and assumes no other relief applies.

• Under the current £1 million limit: £1 million at 18% produces CGT of £180,000.
• Under the proposed £500,000 limit: £500,000 at 18% produces £90,000 of CGT, and the remaining £500,000 at 24% produces £120,000. Total CGT is £210,000.
• The difference: £30,000 more tax on the same taxable gain, leaving £30,000 less available from the sale.

This is not a personal tax calculation. The impact depends on your gain, previous relief claims, taxable income and other available reliefs. The standard CGT rates are currently 18% and 24%, depending on income and gains; not every seller will face the same increase.  Again, a specialist tax advisor will be able to provide a forecast for your own personal situation.

Will your shares qualify for BADR?

For ordinary, non-EMI shares, the main conditions generally need to be satisfied throughout the two years ending with the disposal:

• You must be an employee or office holder of the company, or a company in the same group.
• The company must be a trading company or the holding company of a trading group.
• You must hold at least 5% of the ordinary share capital and voting rights.
• You must also be entitled to at least 5% of both distributable profits and assets on winding up, or at least 5% of the proceeds on a sale of the company.Should you bring your sale forward?

The proposed commencement date is certainly a reason to review your own timetable with your tax advisor and to use this announcement as a call to action if you are already thinking about a short to medium term retirement. 

Certainly, if you are already in discussions with a proposed buyer of your company or were thinking of marketing your business for sale in the near future you may wish to bear the Budget announcement in mind; there is plenty of time before the next tax year for a sale to be completed ahead of the proposed reduction in the relief amount.

Practical steps before selling your shares

• Check your remaining relief. Ask your accountant to review previous BADR and Entrepreneurs’ Relief claims and model the proposed limit against your expected gain.
• Check eligibility before changing your role. Review your employment or directorship, share rights and the company’s trading status before resigning or altering the share structure.
• Prepare the business for scrutiny. Put company records, shareholder agreements, key contracts and financial information in order so avoidable issues do not delay negotiations.
• Look beyond the headline price. Consider the cash payable at completion, deferred consideration, earn-outs and security for unpaid amounts. Ask how the payment structure affects both tax and retirement cash flow.
• Plan your continuing obligations. Negotiate any handover or consultancy role, warranties, indemnities, restrictive covenants and the release of personal guarantees. Selling your shares should not leave unexpected obligations behind.
• Coordinate the advice. Your solicitor, accountant or tax adviser and financial planner should work from the same assumptions about the transaction and your retirement needs.

The announced BADR reduction is a prompt to revisit your retirement exit strategy. Tax is an important part of that exercise, but securing a realistic price, dependable payment terms and a manageable handover can be just as important.

If you are considering selling your company shares as part of your retirement plans, contact our commercial team to discuss the legal steps involved and how these can be coordinated with specialist tax and financial advice.

This article provides general information, not legal, tax or financial advice. It reflects announcements and guidance available on 30 October 2026. The proposed changes remain subject to legislation; the final rules and your individual circumstances should be checked before any transaction.