From 6 April 2026, the Capital Gains Tax rate on qualifying Business Asset Disposal Relief (BADR) claims will increase from 14% to 18%.
On paper, it looks like a modest 4% rise. For clients extracting significant retained profits through a Members’ Voluntary Liquidation, that difference can be substantial.
What Is Changing?
Currently, where BADR applies, qualifying distributions made through an MVL are taxed at 14%.
From 6 April 2026, that rate increases to 18%.
For clients with accumulated reserves, the tax impact is not marginal. It is material.
For many business owners, that additional cost could represent years of pension contributions, further investment capital, or retained personal wealth that would otherwise have been preserved.
When framed in cash terms rather than percentages, the urgency becomes clearer
Why Timing Matters
An MVL is not an overnight process.
There are a number of practical steps involved, including:
- Ensuring the company is solvent
- Reviewing liabilities and risks
- Confirming eligibility for BADR
- Ceasing trade where appropriate
- Preparing statutory documentation
- Coordinating with tax advisers
Planning, professional advice and execution all take time.
If a client wishes to benefit from the current 14% rate, conversations need to start well in advance of April 2026. Leaving matters until late in the tax year could lead to unnecessary pressure, rushed decisions, or, in some cases, missing the window entirely.
Which Clients Should Be Reviewing Their Position
It may be worth having discussions with clients who are:
- Winding down a profitable company
- Sitting on significant surplus cash or retained profits
- Planning for retirement
- Considering an exit or group restructure
Even where closure is not expected to be immediate, understanding the potential tax differential allows directors to make informed decisions.
A Planning Conversation
Tax should never be the sole driver of a commercial decision. However, where a rate change is confirmed and the financial impact is clear, proactive planning is simply good governance.
A short, early conversation can clarify:
- Eligibility for BADR
- Timelines
- Practical considerations
- Whether an MVL is appropriate
For clients with substantial retained profits, a 4% difference is not just a percentage. It is a significant amount of money.
If you would like to talk through scenarios or timing considerations for your clients ahead of April 2026, our team is always happy to have an early discussion.
