UK proposes halving business disposal relief limit

A proposal for qualifying disposals

A policy paper published on 29 October proposes reducing the Business Asset Disposal Relief lifetime limit from £1 million to £500,000 for qualifying disposals on or after 6 April 2027. It says legislation will be introduced in Finance Bill 2026. The measure should therefore be described as a proposed legislative change, with the intended operative date, rather than an already completed amendment to current law. Official source.

The limit is not a tax-free allowance

The paper explains that qualifying gains currently receive an 18% Capital Gains Tax rate within the applicable lifetime limit. Reducing the limit concerns the amount of qualifying gains that can receive that relief; it is not an exemption of the first £500,000 from all tax. Whether a disposal qualifies remains a separate question about the asset, ownership and applicable relief conditions.

Previous use of relief remains relevant

The proposal says the lifetime calculation must take account of relief claimed for qualifying gains in the past. An owner should not assume that the new figure creates a fresh allowance unrelated to earlier disposals. A useful review starts with previous claims and supporting returns, then models the proposed transaction using clearly stated assumptions about qualification, timing and the final legislation.

Signing early may not settle the issue

The policy paper includes anti-forestalling rules for unconditional but uncompleted contracts before 6 April 2027, with stated conditions concerning tax advantage and, for connected parties, commercial reasons. It also describes rules for certain share reorganisations and elections. A contract date or restructuring step should not be treated as a guaranteed way to preserve the higher limit without reviewing those provisions and the transaction’s facts.

A clearly hypothetical example

An owner expects to sell a business in 2027 and has already claimed relief on earlier qualifying gains. They need to consider those historical claims, the expected gain and the proposed disposal date together. Rushing to sign a document without examining conditions and anti-forestalling rules could create uncertainty instead of solving it. The illustration is not a recommendation to sell or an estimate of anyone’s tax bill.

Prepare before committing to a timetable

Collect acquisition records, ownership history, earlier relief claims, draft agreements and details of connected parties or reorganisations. Ask an adviser to distinguish current law, the published proposal and any final legislative changes. Commercial objectives and contractual obligations should be considered alongside tax. Recheck the enacted position before completion; a Budget policy paper alone cannot establish the final treatment of an individual disposal.

Legal check date

Sources and law checked on 30 October 2026. Later developments are not reflected automatically. Application of the rules depends on the individual facts.