Chancellor John Healey has confirmed that he will reduce the threshold for Business Asset Disposal Relief in Capital Gains Tax.

Healey lowered the threshold for business asset disposal relief (BADR) in capital gains tax (CGT) from £1m to £500,000 which he said will mean “no changes for three in four claimants”.

But industry figures have blasted the cut, arguing it leaves qualifying companies much worse off.

Michael Carter, Partner and Head of Incentives at Osborne Clarke, said: “The Chancellor has delivered something of a mixed message for entrepreneurs in today’s Budget.

“Business Asset Disposal Relief has been cut back again…that leaves qualifying business owners able to save a maximum of just £30,000 in capital gains tax over their lifetime under the existing relief.”

Nimesh Shan, chief executive of Blick Rothenberg, said reduction “makes little sense”, arguing Healey should have just “abolished it completely”.

Under current rules, BADR cuts CGT on selling a business up to 18 per cent on up to £1m of gains over a lifetime.

The BADR rate has been hiked twice in the past two years, rising to 14 per cent in April 2025. It was then hiked to 18 per cent last year by former chancellor Rachel Reeves.

The change will take effect from April 2027.

Founder’s relief

Away from cutting BADR, Healey also unveiled a new relief in CGT, dubbed ‘Founder’s Relief’, in a bid to keep companies operating in the UK.

The tax relief is a 10 per cent rate on lifetime gains of up to £10m “for the founders of our most successful firms”.

He said: “I know that starting a company means taking risk. Leaving a secure job to build something with no guarantee that it will work. 

“And I believe that when business founders take that risk, build an exceptional company and create wealth for Britain, we should recognise that success and keep those people here to invest again.”

Malli Kini, partner at advisory firm Blick Rothenberg, said: “A new founders’ relief on the first £10 million of gains is a bold and welcome move that could make the UK a far more attractive place to start and grow a business. It will go some way to softening the blow of halving the Business Asset Disposal Relief limit.

“However, the devil will be in the detail. If the qualifying conditions are too narrow, many long-standing family businesses and smaller owner-managers will find themselves worse off overall, while the benefit goes mainly to venture-backed start-ups.”

Will Dowsett, UK private business tax leader at PwC, added the “proposed eligibility criteria remains onerous”.

“Conditions on ownership, turnover, employees, growth and research and development expenditure, all of which bring additional complexity and are subject to consultation,” he said.

“It also takes us back towards territory we have seen before under the old Entrepreneurs’ Relief regime. There is a risk that continual changes to the reliefs around business ownership add complexity when what entrepreneurs often value most is a tax system that is stable and predictable.”