The Budget halved one CGT relief and proposed another. For business owners considering a sale, the changes put both exit timing and deal preparation in focus.
What has changed
The main CGT rates have not changed, with the higher rate remaining at 24%. The significant changes for sellers concern the reliefs, and one date matters: 6 April 2027.
BADR relief is cut in half
From 6 April 2027, the lifetime limit on Business Asset Disposal Relief will fall from £1 million to £500,000, while the 18% rate on qualifying gains will remain unchanged. A seller who would otherwise have used the full £1 million lifetime limit could therefore pay up to £30,000 more in CGT.
A proposed new 10% rate for Founders’ Relief
Qualifying gains of up to £10 million would be taxed at 10%. Under the proposals, an individual would need to have:
owned at least 25% of the ordinary share capital when the company began trading;
held the shares for at least five tax years before disposal; and
been UK resident for at least five continuous tax years before disposal.
The company must also meet detailed requirements relating to trading, UK presence, turnover, headcount, growth and innovation. The proposals remain subject to consultation, and eligibility is expected to be narrow.
CSOP limit doubles
From 6 April 2027, the individual CSOP (EMI2) limit will rise from £60,000 to £120,000, and the maximum period for exercising options while retaining the tax advantages will increase from 10 to 15 years. The interaction with the EMI individual limit will also be removed, allowing employees to hold up to £250,000 of EMI options alongside £120,000 of CSOP options.
What it means for deals
Sellers who may qualify for BADR should factor the 6 April 2027 change into the transaction timetable. Completing before that date could preserve the current £1 million lifetime limit, but any tax saving should be weighed against valuation, funding, negotiating leverage and execution certainty. The CGT disposal date depends on the structure of the transaction, so specialist tax advice should be taken before the timetable is fixed.
Founders who may qualify for Founders’ Relief face a different timing consideration, as the proposed relief will apply only to qualifying disposals on or after 6 April 2027. Before relying on the relief when setting the timetable, founders should assess whether they can meet the individual- and company-level requirements. This requires a review of the historic shareholding and trading history, supported by appropriate corporate and financial records. Given the narrow eligibility criteria and ongoing consultation, do not structure a transaction on the assumption that the relief will be available.
The increased CSOP limit may give companies greater scope to retain and incentivise key employees ahead of an exit, including through larger grants from 6 April 2027. Companies planning a sale should consider whether the additional capacity supports further grants and how those grants fit with the expected exit timetable. Review existing options for vesting, exercise, and change-of-control provisions so any exercises, allotments, or transfers can be reflected in the fully diluted cap table, transaction documents, and completion mechanics.
What to do now
Assess whether the 6 April 2027 date affects the exit timetable.
Check whether any founder could satisfy the proposed Founders’ Relief conditions.
Review option plans, proposed grants and change-of-control provisions.
Take tax and legal advice before fixing the transaction timetable.
Early preparation keeps your options open. It also stops a tax deadline or an old defect from dictating the structure once negotiations have begun.
Reevaluating exit timing and deal preparation following the 2026 Budget?
If you are considering a sale or restructuring and would like to talk it through, please contact our corporate team.
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Disclaimer: This publication is provided by Laytons LLP for informational purposes only. The information contained in this publication should not be construed as legal advice. Any questions or further information regarding the matters discussed in this publication can be directed to your regular contact at Laytons LLP or Laytons’ Corporate team.