Written by Jonathan Munnery, Partner | Last updated: 2 November 2026 | Reading time: 3 mins
What did the Budget change when it comes to Business Asset Disposal Relief?
When you close a solvent company through a Members’ Voluntary Liquidation (MVL), the money you take out is taxed as a capital gain rather than as income. If you qualify for Business Asset Disposal Relief (BADR), the rate of Capital Gains Tax levied on those distributions is reduced to rate of just 18%.
That reduced rate of Capital Gains Tax only applies up to a lifetime limit. Until now, the limit has been £1 million. As announced in the 2026 Budget, however, from 6 April 2027, the lifetime limit will drop to £500,000.
Any distribution in excess of £500,000 will be taxed at the main Capital Gains Tax rate, which is currently 24% for higher-rate taxpayers, from April 2027. You should be aware that this £500,000 is a lifetime limit, therefore if you have received Business Asset Disposal Relief on any gains previously, this will be deducted from your remaining allowance.
How does the change to Business Asset Disposal Relief and its lifetime limit affect me?
While most directors looking to close or liquidate their solvent company will not be impacted by this change to the lifetime limit, there are almost certainly directors reading this page who will benefit from starting their solvent liquidation prior to the reduction of the changes to BADR.
Our team of licensed insolvency practitioners have pulled together three quick questions you should ask yourself which will tell you whether it's worth looking more closely at the timing of your MVL:
- Is your company solvent? An MVL is only for companies that can pay all their debts in full. If your company is struggling, different rules and options apply and these remain unaffected by the upcoming change to Business Asset Disposal Relief.
- Do you have more than £500,000 to distribute to shareholders? Think about the cash and assets left in the company after all debts and tax have been paid. If this exceeds £500,000 per shareholder, you are likely to get caught up in the new BADR rules unless you have the MVL process well underway before April 2027. You will also need to include any BADR you've already claimed in the past as this contributes towards the £500,000 lifetime limit.
- Do you qualify for Business Asset Disposal Relief? You'll usually need to have owned at least 5% of the shares and voting rights, and been a director or employee, for at least two years in order to qualify for BADR following the solvent liquidation of your company. If you are unsure whether this applies to you, our licensed insolvency practitioners can help you understand your position and advise you as to where you stand and what your options are.
If you answered yes to all three of these questions, and you are considering closing your company in the near future, the change to Business Asset Disposal Relief and the lifetime limit is likely to affect you, and it's worth speaking to our licensed insolvency practitioners as soon as possible to better understand your options.
How do I plan my MVL around the change to Business Asset Disposal Relief?
If you believe the solvent closure of your company may be affected by the upcoming change to Business Asset Disposal Relief and would like to reconsider your timing of the MVL, our licensed insolvency practitioners are here to help.
As an MVL takes some time to set up, here are the steps we'd suggest you start now to put you in the best position possible:
- Check your figures. Check your likely gain following the MVL and determine whether this will take you above the new £500,000 lifetime limit. As this £500,000 is a lifetime limit, you should also consider any BADR allowance you've already used in previous disposals.
- Get advice on the MVL process. Seeking advice from a licensed insolvency practitioner once you have made the decision to exit your solvent company is highly recommended. At UK Liquidators, our team of licensed insolvency practitioners can explain how an MVL works, whether it’s the best option for your company, and clarify whether the April 2027 changes will affect you.
- Get the company's affairs in order. To make the MVL process run smoother, you can make a start by collecting any money owed, settling any outstanding creditors, and ensuring your filings are up to date. This can help to speed up the MVL and allow for distributions to be made much sooner. This is especially important if you are keen to get the process completed ahead of the upcoming changes.
If you'd like to receive your money before the BADR changes in April 2027, it's sensible to start the conversation early rather than waiting until the last minute.
What if closing isn't the right move yet?
A tax change on its own shouldn't decide the future of your business. Depending on your plans, other options may suit you better:
- Selling the business or your shares. A sale can also qualify for BADR and may be worth more to you than closing if the business has value as a going concern.
- Keeping the company dormant. If you're unsure about your plans, you can stop trading and keep the company on the register while you decide. Bear in mind the three-year window for BADR after a company stops trading.
- Carrying on trading and extracting profits gradually. Some directors prefer to keep trading and take income over several years.
As licensed insolvency practitioners, we can explain what each route means for you, so you can make the decision that's right for your current situation and also your future plans.
How can UK Liquidators help?
We speak to directors every day who are considering closing their company via an MVL. Our licensed insolvency practitioners can explain your options clearly, work alongside you and give you a realistic timescale for an MVL, so you can plan around the April 2027 change with confidence.
If you are thinking about closing your solvent company, contact the experts at UK Liquidators today and take the first step towards understanding your options.
