Business Asset Disposal Relief 2026/27: £1 Million Limit Worked Example
How Business Asset Disposal Relief's 18% rate and £1 million lifetime limit work together in 2026/27, with a worked example of a business sale that exceeds the limit.
A rate that has risen fast
Business Asset Disposal Relief has climbed sharply over recent Budgets: from 10% before April 2025, to 14% in 2025/26, to 18% from April 2026. While still a meaningful discount versus standard Capital Gains Tax rates, the gap has narrowed considerably for business owners planning a sale.
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The £1 million BADR lifetime limit applies once across a person's entire history of qualifying business disposals — it is not refreshed each tax year. Someone who sold a qualifying business for a £600,000 gain five years ago and claimed BADR on all of it has only £400,000 of lifetime limit remaining for any future qualifying sale.
Worked example: £1.5 million gain, higher-rate taxpayer
The first £1,000,000 of gain qualifies for BADR at 18%: £1,000,000 × 18% = £180,000. The remaining £500,000 is taxed at the standard higher CGT rate of 24% (as this is a higher-rate taxpayer): £500,000 × 24% = £120,000. Total Capital Gains Tax: £300,000, before applying the £3,000 annual exempt amount to marginally reduce the taxable gain.
Spouses each get their own limit
Because the £1 million lifetime limit is personal, not per-business, a business jointly owned by two spouses could see combined gains of up to £2 million taxed at the 18% BADR rate, split according to each spouse's ownership percentage — a meaningful planning consideration for couples structuring joint ownership of a business ahead of a future sale.
Bottom line
The 2026/27 BADR rate of 18% still offers a real saving versus standard CGT rates, but the gap has shrunk considerably as the rate has climbed from 10% two years earlier. Anyone approaching or exceeding the £1 million lifetime limit, whether from a single large sale or the cumulative effect of previous disposals, needs to plan around standard CGT rates applying to the excess.
Sources
- GOV.UK: Business Asset Disposal Relief
- GOV.UK: Capital Gains Tax Rates
Frequently asked questions
What is the Business Asset Disposal Relief rate for 2026/27?
18%, having risen from 14% in 2025/26 and 10% before April 2025 — a significant increase over the space of two tax years, though still well below the standard 24% higher rate of Capital Gains Tax on most other gains.
What is the Business Asset Disposal Relief lifetime limit?
£1 million. This is a cumulative lifetime limit across all qualifying business disposals, not an annual allowance, meaning it only needs to be used once across a person's lifetime of business sales to be exhausted.
What happens to gains above the £1 million lifetime limit?
Gains above the £1 million cumulative limit are taxed at standard Capital Gains Tax rates — 18% or 24% depending on the seller's overall income tax position — rather than the 18% BADR rate, though at 2026/27 rates the basic-rate BADR figure happens to match the basic CGT rate.
How much tax would someone pay selling a business for a £1.5 million gain?
The first £1 million of gain qualifies for BADR at 18%: £180,000. The remaining £500,000 is taxed at standard CGT rates — 24% for a higher-rate taxpayer: £120,000. Total CGT: £300,000, before the £3,000 annual exempt amount is applied to reduce the taxable gain slightly.
Does the £1 million limit apply per person or per business?
Per person — it is a cumulative lifetime limit across all qualifying disposals made by that individual, not a per-business or per-transaction limit, so someone who has used £1 million of BADR on a previous business sale has none left for a later sale.
Can spouses each use their own £1 million lifetime limit?
Yes — the lifetime limit applies individually to each person, so a jointly owned qualifying business sold by two spouses could potentially see up to £2 million combined taxed at the 18% BADR rate, split according to each spouse's ownership share.
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