Changes to BADR in Budget could leave advice firm sellers £30k worse off

Reducing the lifetime limit on Business Asset Disposal Relief (BADR) could leave advisers up to £30,000 worse off when they sell their advice business, according to Clifton Wealth Partnership.

In the Autumn Budget, the Chancellor announced that the lifetime limit on gains eligible for BADR will be halved from £1m to £500,000 from 6 April 2027.

Clifton noted that the lack of changes to pension policy and capital gains tax (CGT) rates would be a relief to clients and advice firm owners, who may have feared potential announcements.

However, Clifton Wealth Partnership MD, Anthony Carty, said that the cut to BADR could have an impact on those looking to sell their businesses.

“The extra tax due to the loss of relief could see owners exiting their businesses walk away with up to £30,000 less,” he continued.

“With less than six months to go until the relief is halved, some business owners may be tempted to rush to get their deals over the line before the change in April.

“While £30,000 is a meaningful sum, it isn’t a reason to sell a business you’re not ready to sell or rush through a deal that needs a lot of care and attention.”

The higher rate of CGT is 24 per cent but is reduced for 18 per cent on the first £1m of profit for those selling businesses.

However, from April 2027, this is being reduced to £500,000, meaning an extra 6 per cent of tax will be placed on the second £500,000 of profit, costing £30,000.

Carty warned potential business sellers who were thinking of trying to get ahead of the April change would risk getting a weaker price or terms that were unsuitable for them, their employees, and clients.

“Dent in the valuation can easily cost more than the tax you were trying to save,” he said.

“It’s important to point out it’s a lifetime limit, which means owners who’ve claimed the relief before need to check how much of it they’ve used, because previous claims will count towards the new, lower limit.”

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