The 2026 Autumn Budget has delivered another blow to business owners planning their exit. Forthcoming changes to Business Asset Disposal Relief (BADR) will reduce their lifetime allowance. BADR is being cut in half from April 2027. So for directors considering closing their solvent companies in the near future, this could mean significantly higher tax bills if they delay.

The changes were announced in the Autumn Budget 2026 and are expected to take effect from 6 April 2027, subject to the necessary legislation.

For directors approaching retirement, contractors moving on to new opportunities or shareholders looking to release accumulated company profits, the latest announcement makes planning ahead more important than ever.

A Members’ Voluntary Liquidation (MVL) remains one of the most effective ways to close a solvent limited company and distribute its remaining assets to shareholders.

However, with the Government reducing the amount of qualifying gains that can benefit from BADR, the opportunity to maximise the tax advantages of an MVL under the existing rules is narrowing.

What has changed to Business Asset Disposal Relief in the Autumn Budget?

On Wednesday 28 October 2026, the Chancellor announced that the lifetime limit for Business Asset Disposal Relief would be reduced from £1 million to £500,000, effective for qualifying disposals made on or after 6 April 2027.

BADR, formerly known as Entrepreneurs’ Relief, allows qualifying business owners to pay a reduced rate of Capital Gains Tax (CGT) when disposing of their business or shares.

The changes mean:

  • Until 5 April 2027: Qualifying individuals can benefit from an 18% CGT rate on up to £1 million of lifetime qualifying gains.
  • From 6 April 2027: The 18% rate will remain, but it will apply to only £500,000 of lifetime qualifying gains.
  • Gains exceeding the available BADR allowance: These will be taxed at the normal applicable CGT rate, currently up to 24% for individuals.

Importantly, the lifetime allowance applies to each qualifying individual, rather than each company. Previous BADR claims also count towards the lifetime limit.

The changes follow earlier increases to the BADR tax rate, which rose from 10% to 14% in April 2025 and then to 18% in April 2026.

Although the latest Budget hasn’t increased the rate again, halving the allowance represents another substantial reduction in the potential tax savings available to business owners.

How much could delaying your company closure cost?

For shareholders with substantial retained profits, the financial consequences could be significant.

Consider a director who owns 100% of a solvent trading company and is planning to close it through an MVL.

Assume the director has a taxable capital gain of £1 million, qualifies fully for BADR, has not previously used any of their lifetime allowance and would otherwise pay CGT at the higher 24% rate.

Under the rules applying before 6 April 2027:

  • £1 million qualifying gain taxed at 18%.
  • Total Capital Gains Tax: £180,000.

Under the announced rules from 6 April 2027:

  • First £500,000 taxed at 18% = £90,000.
  • Remaining £500,000 taxed at 24% = £120,000.
  • Total Capital Gains Tax: £210,000.

That’s a potential £30,000 additional tax liability simply because of the reduction in the BADR lifetime limit.

This is an illustrative comparison using a taxable gain after relevant allowances and deductions. Actual liabilities will depend on individual circumstances, previous relief claims and the applicable tax treatment.

For directors who have spent years building their businesses and accumulating reserves, this is money that could otherwise contribute towards retirement, family security or their next venture.

And with the April 2027 deadline approaching, the time to review an exit strategy is now.

Why an MVL is an attractive option for solvent company directors

A Members’ Voluntary Liquidation is a formal procedure that allows a solvent limited company to be closed in an orderly and controlled manner.

Unlike an insolvent liquidation, an MVL is designed for companies that can pay all their outstanding debts, including interest, within 12 months and have surplus assets available to distribute to shareholders.

One of the key advantages is the tax treatment of shareholder distributions.

Rather than extracting the remaining funds through dividends, which are generally subject to Income Tax, distributions made during an MVL are normally treated as capital.

This can provide substantial tax advantages, particularly where shareholders also qualify for BADR.

An MVL can also offer several practical benefits:

  • Tax efficiency: Capital distributions may attract a lower tax liability than dividend payments, depending on individual circumstances.
  • A structured closure: A licensed insolvency practitioner oversees the winding-up process and ensures outstanding matters are properly addressed.
  • Access to company funds: Where circumstances permit, shareholders may receive initial distributions relatively quickly after liquidation begins.
  • Certainty and peace of mind: Directors can bring their involvement with the company to an orderly conclusion and move forward.

For directors who have already decided to retire, cease trading or move on from a company they no longer need, an MVL offers a professional and potentially tax-efficient exit route.

Why directors considering an MVL should review their plans before April 2027

The Autumn Budget has introduced an important consideration for directors who are already planning to close a solvent company.

From 6 April 2027, the Government intends to reduce the lifetime limit for Business Asset Disposal Relief from £1 million to £500,000. This means shareholders with substantial qualifying gains could face a higher Capital Gains Tax bill if their disposals fall under the new rules.

However, starting a Members’ Voluntary Liquidation before April 2027 does not automatically secure the existing £1 million limit.

The timing of capital distributions, the shareholder’s eligibility for BADR and the company’s financial circumstances must all be considered.

HMRC has also announced anti-forestalling provisions designed to prevent certain arrangements from securing the earlier tax treatment artificially.

For directors who have already decided to retire, cease trading or close a company that has fulfilled its purpose, early planning may help preserve available options.

An MVL involves more than appointing a liquidator. Directors must establish that the company is solvent, identify and provide for outstanding liabilities, prepare the necessary statutory declaration and ensure the liquidation is properly funded.

A straightforward company holding cash with no significant outstanding liabilities may be able to progress quickly. Companies with property, investments, unresolved tax matters or outstanding debts may require more preparation. 

The Government has also announced wider reforms to the taxation of company distributions, expected from April 2028, although the detailed legislation remains subject to further consultation.

An insolvency practitioner can help assess whether an MVL is appropriate, while a qualified tax adviser can confirm the shareholder’s BADR eligibility and the potential tax consequences of the proposed distributions.

Could you qualify for Business Asset Disposal Relief?

Although MVL distributions normally receive capital treatment, BADR is not automatic.

For a shareholder disposing of ordinary shares in their personal trading company, the eligibility requirements generally include:

  • Having held at least 5% of the company’s ordinary share capital and voting rights for the required two-year period.
  • Meeting the additional 5% economic interest requirements.
  • Having been an employee or office holder of the company during the qualifying period.
  • The company having met the relevant trading company requirements.

Specific provisions can also apply where a company has already ceased trading, including a three-year period in certain circumstances.

There are additional anti-avoidance rules to consider, particularly where shareholders intend to continue the same or similar business activities following liquidation.

For this reason, directors should obtain appropriate advice before making any decision based on the potential tax savings.

Is now the right time to close your solvent company?

The latest Budget changes will not affect every business owner equally.

Directors whose lifetime qualifying gains fall below £500,000 may see no direct reduction in their available BADR allowance.

However, shareholders expecting larger capital gains, those who have previously claimed BADR, and directors already contemplating retirement or company closure should consider reviewing their position.

An MVL should be driven by genuine commercial and personal circumstances, not simply by a desire to secure a tax advantage. But where a company has completed its purpose and the shareholders are already planning to close it, unnecessary delays could now have substantial financial consequences.

Talk to BusinessRescueExpert about your MVL options

At BusinessRescueExpert, we understand that closing a business is a major decision, particularly when you’ve spent years building it into a successful company.

Our experienced team can help directors navigate the Members’ Voluntary Liquidation process, understand the steps involved and bring their solvent companies to an orderly conclusion.

With the announced BADR changes due to take effect on 6 April 2027, getting advice early could make a significant difference to your available options.

We can also work alongside your accountant or tax adviser to help ensure the liquidation process fits with your wider financial and tax planning.

If you’re considering retirement, winding down a solvent company or releasing accumulated business profits, now is the time to explore your options.

Find out more about our Members’ Voluntary Liquidation services and get in touch with BusinessRescueExpert today for a free initial conversation.

Don’t leave your company exit planning until the April 2027 deadline is upon you.