Budget 2026: what does it mean for entrepreneurs and business owners?

Selling your business? The tax landscape is changing

One of the most significant announcements was the reduction in the lifetime limit for Business Asset Disposal Relief (BADR).

From 6 April 2027, the amount of qualifying gains that can benefit from BADR will fall from £1 million to £500,000. The qualifying CGT rate remains at 18%, and previous claims count towards the lifetime allowance. The government says three-quarters of claimants should still receive relief on their entire gain.

For owners expecting a substantial gain on the sale of their business, however, the difference could be meaningful.

At current CGT rates, reducing the BADR limit from £1 million to £500,000 halves the maximum lifetime tax saving available through the relief from £60,000 to £30,000.

That naturally raises questions for anyone contemplating a sale, management buyout, family succession or other exit.

But tax should not dictate the commercial decision.

Accelerating a sale simply to meet a tax deadline could prove counterproductive if it means accepting the wrong valuation, choosing an unsuitable buyer or proceeding before you and the business are ready.

Instead, the Budget makes early planning increasingly important.

A major new incentive, but not for every founder

Against the reduction in BADR, the government announced the introduction of Founders’ Relief from 6 April 2027.

The proposal could provide a 10% CGT rate on up to £10 million of qualifying lifetime gains for certain founders and early investors in high-growth, innovative businesses. On the face of it, that is a potentially significant incentive.

However, business owners should not assume that Founders’ Relief will simply replace the BADR they may lose.

The proposed eligibility requirements are considerably narrower. Among other criteria, an individual would generally need to have held at least 25% of the company when its trade, or preparations to trade, began, hold their shares for at least five years and meet UK residency requirements. The business itself would also need to meet tests covering its UK presence, scale, growth and innovation.

Importantly, the detailed rules are not yet final. HM Treasury's technical consultation runs until 30 November 2026, with legislation expected through the Finance Bill 2026-27.

For founders who appear likely to qualify, it could transform the tax position of a future exit. For many other business owners, BADR will remain the more relevant consideration.

More support at the smaller end of the scale

The Budget also contains measures designed to provide some breathing room for smaller businesses and people taking their first steps into entrepreneurship.

The Trading Allowance is due to rise from £1,000 to £3,000 from 6 April 2027.

For someone earning money from a side business or testing an entrepreneurial idea alongside their main employment, the increased allowance could make it easier to get started.

Changes to business rates could provide further support to parts of the small business sector, particularly businesses operating from physical premises.

While individually these measures may appear modest, they contribute to a wider Budget theme: encouraging people to create and grow businesses while focusing some of the most generous incentives on businesses demonstrating significant growth and innovation.

Think beyond the next tax year

Perhaps the biggest lesson from the Budget is that business and personal financial planning increasingly need to be considered together.

For many owners, their company represents one of their largest assets. Decisions about its future can therefore have a profound effect on retirement, family wealth and long-term financial security.

If you are hoping to sell a business for £2 million, £5 million or £10 million, the question is not simply what tax you will pay.

It is also:

• How much do you actually need from the sale to fund the life you want?
• When is the right time, financially and personally, to step away?
• Could you sell gradually, bring in a management team or pass ownership to the next generation?
• How should the proceeds be invested once the business is sold?
• What does an exit mean for your retirement and estate planning?
• Could changes to the structure or timing of a transaction have unintended tax consequences?

These are questions that ideally need answering well before the heads of terms for a sale are signed.

Planning for an exit starts long before the exit

The temptation following any Budget is to look for an immediate action.

For business owners, the smarter response may be to step back.

The reduction in BADR could make the timing of some transactions more important, while the proposed Founders’ Relief could be extremely valuable to those who eventually meet its criteria. But neither should be considered in isolation.

A business exit is often the culmination of decades of work. The decisions surrounding it can determine not only how much you receive, but how effectively that wealth supports you and your family for decades afterwards.

That is why bringing together your financial adviser, accountant and solicitor early can be so valuable. Your advisers can consider the transaction from different perspectives and help ensure that a tax decision does not undermine a wider financial or commercial objective.

The Budget may have changed some of the rules, but the principle remains the same: the earlier you plan for the future of your business, the more options you are likely to have. If you are thinking of exiting your business and are looking for advice, please contact your atomos Financial Adviser or email getintouch@atomos.co.uk

Here when you need us

Business planning can be complex. Our financial planners can support you - getting to grips with what you want to achieve and finding the best solution for you, your family and your business. Speak to your financial planner if you, or someone you know, need our help.