BADR Budget News On Members Voluntary Liquidation

BADR Budget Speculation

The BADR budget news; we knew it might be coming.

Today in the budget the BADR news for members voluntary liquidation, finally what was talked about for months, sprouted. 

In an earlier post Is Business Asset Disposal Relief At Risk?, the risk was considered and it has now manifested itself. The prospect of changes to Business Asset Disposal Relief was highlighted.

After years of budget speculation, the effectiveness of this relief is being reduced but not scrapped.

What Happened To BADR Today?

As a result, the Chancellor announced that the relief will be maintained at the current threshold of up to £1 million. 

So, what about the actual BADR news then?? Well, from April 2025 Business Asset Disposal relief rate will move from the current 10% to 14% and then to 18% in April 2026. However, in other BAD(R) news, generally capital gains tax will rise from 20% to 24% at the higher level and go from 10% to 18% at the lower level.

As a result, people looking to extract their cash and close their solvent businesses now have potentially five months to continue to take advantage of the 10% relief, if they qualify for the relief.

The Chancellor said:

Alongside these changes to the headline rates of Capital Gains Tax…

… we are maintaining the lifetime limit for Business Asset Disposal Relief at £1m…

… to encourage entrepreneurs to invest in their businesses.

Business Asset Disposal Relief will remain at 10% this year…

… before rising to 14% in April 2025…

… and 18% from 2026-27…

… maintaining a significant gap compared to the higher rate of Capital Gains Tax.

Time To Act On BADR

So Business Assets Disposal Relief (“BADR”) survives the 2024 budget but from April 2026 you pay 18% capital gain tax. If you do not qualify for BADR you will now pay tax at 24% on the higher rate taxpayer element.

However, the Chancellor has provided a brief window of opportunity for people for example considering closing their solvent businesses. You have approximately another five months to dispose of your interest in a company and perhaps for example go into members voluntary liquidation. You may still be able to claim the current BADR rate of 10% on the £1 million threshold.

The one piece of good news as opposed to the other BADR news, is the lifetime limit of BADR is staying at £1 million. The relief will therefore be curtailed as higher rates of capital gains are applied to BADR. After April 2026 unlike the current advantage being a 10% gap between the higher rate capital gains tax that existed until today (at 20%) and the 10% BADR rate, there will now be a reduced benefit of 6% (being the difference between 18% and the higher rate of capital gains tax of 24%).

If you therefore are likely to qualify for BADR it might be time to act, get your skates on and give us a call.