Business Asset Disposal Relief (BADR), which reduces the effective CGT rate, will be increasing as follows:

• BADR remains at 10% in the 2024/25 tax year.
• It increases to 14% for disposals made on or after 6 April 2025.
• It increases from 14% to 18% for disposals made on or after 6 April 2026.

These changes may affect business owners and their decisions on when they sell their business.

Owner-managers double up BADR by allowing spouses to hold sufficient shares to qualify for BADR in their own right. Each spouse has their own BADR lifetime limit.

Accelerate exit plans before 6 April 2025. The BADR rate increases from 10% to 14% from 6 April 2025, so a shareholder who would qualify for BADR may wish to crystallise their share disposal prior to that date.

A straightforward means of crystallising the disposal of shares is a third-party sale. This offers the sellers the potential for a clean exit. However, the timing is not under the control of the sellers and can involve complex due diligence processes, sale negotiations and the risk of the sale falling through at any point before completion.

Other ways of crystalising the gain in time to benefit from the lower rate of BADR include:

• A “friendly sale” to the management team
• A company can buy back its own shares from one or more shareholders to allow them to exit the company without the need for a third-party sale.
• It is also possible to gift shares in a trading company or holding company of a trading group usually to family members, but it could be to a key employee.