Business asset disposal relief limit to halve to £500,000

The Business Asset Disposal Relief lifetime limit will fall from £1 million to £500,000GOV for qualifying disposals made on or after 6 April 2027. Qualifying gains within the limit are taxed at 18%GOV. The change was announced at Budget 2026 and legislation will be introduced in the Finance Bill 2026GOV. The lifetime limit takes into account the value of relief already claimed in respect of qualifying gains in the pastGOV, so earlier sheltered gains use up the limit.

The policy objective is to target the relief at business owners with smaller gains: three-quarters of claimants will still receive relief on their entire gain, with the focus on the start-up and scale-up phases when most investment decisions are taken.

Anti-forestalling rules catch unconditional but uncompleted contracts entered into before 6 April 2027GOV. Gains on those contracts face the £500,000 cap unless the parties can show they did not contract to obtain a tax advantage from the timing rule in section 28 of the Taxation of Chargeable Gains Act 1992, or, for connected parties, that the contract was entered into for wholly commercial reasonsGOV. Where an escape applies and the gain exceeds £100,000, a statement must also be madeGOV. A further rule covers share reorganisations and exchanges: electing to disapply the no-disposal rules in section 169Q on or after 6 April 2027 treats the disposal as taking place at electionGOV, so the £500,000 limit appliesGOV.

Relief is due only upon a claim under section 169MGOV. An individual claims in the personal return for the year where a notice to file has been issuedGOV; trust business assets need a joint claim by trustees and the qualifying beneficiaryGOV. Claims must be made by the first anniversary of the 31 January following the tax year of the disposalGOV, and a claim may be amended or revoked within the time limit. Spouses and civil partners are separate individuals who may each claim up to the maximum available to an individual.

The computation runs through section 169N: gains and losses on the disposals making up the material disposal of business assets are netted under Taxation of Chargeable Gains Act rules, and only a resulting net gain can attract relief.

Current law for the relief sits in sections 169H to 169V of, and Schedule 7ZA to, the Taxation of Chargeable Gains Act 1992, with the Finance Bill 2026 reducing the section 169N lifetime limitGOV.