Closing a solvent trading company? Consider doing so before 6 April 2026

In certain circumstances, shareholders of such businesses may qualify for Business Asset Disposal Relief (“BADR”). BADR is a tax relief which offers a reduced rate of Capital Gains Tax (“CGT”) payable on the profit you make (up to £1 million of gains), when selling or disposing of business assets.

From 6 April 2026 BADR CGT rates will increase from 14% to 18%.

By exiting your business via a solvent liquidation and distributing those assets before 6 April 2026, a qualifying company with net assets of £2 million to be distributed to its 2 shareholders could provide a combined tax saving to those shareholders of £80,000*.

*  £2 million x (18%-14%) = £80,000.

The actual tax position will vary depending on your circumstances. This illustrative figure ignores the CGT annual exemption, assumes that the distribution to the shareholders qualifies for BADR in full, that the shareholders have not previously claimed any BADR or Entrepreneurs Relief, and that the shareholders have no tax base cost or capital subscribed in their shares. This illustration also assumes that the Targeted Anti-Avoidance Rules do not apply to distributions made in the course of the liquidation.

As BADR rates are set to rise from 14% to 18% on 6 April 2026, timing has never been more critical for shareholders looking to exit a solvent trading company efficiently. Planning ahead and completing a solvent liquidation before the rate increase can result in substantial tax savings, as illustrated in the example above. However, every shareholder’s position is unique, and the availability of BADR depends on meeting specific qualifying conditions. Seeking early, tailored advice ensures that you fully understand your options, optimise your tax position, and extract the value from your business in the most effective way.

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Our solvent liquidation team get the best outcomes for you (or your clients) by working with our specialist tax team and our financial planning team to ensure your lifelong investment in your business continues to work hard for you even after you cease to trade.