From 6th April 2026, the reduced rate of Capital Gains Tax (CGT) that currently applies to Business Asset Disposal Relief (BADR) and specific investment reliefs will rise to 18% from 14%. These rising rates can have significant knock-on effects for distressed or insolvent companies, especially for directors and shareholders.
Our team explain the changes that are coming to CGT relief and how struggling businesses could be impacted.
What CGT changes were announced during the Autumn Budget 2025?
The Autumn Budget confirmed the rise of CGT rate for BADR or investors relief to 18%, which will come into effect from 6th April 2026. The announcement also introduced clarifications and tighter conditions around reliefs for disposals of shares and business incorporations to help reduce avoidance and narrow eligibility.
Who will be affected by the CGT changes in April 2026?
Business owners who are selling qualifying business assets, who had expected the 14% BADR rate beyond 2025/26, will see a higher rate of 18% from April 2026. Individuals disposing of shares that previously qualified for investors’ relief may also be affected by the tightened relief conditions.
How will the CGT increase impact struggling businesses?
Even though CGT is usually associated with solvent business exits, rising rates can still have a knock-on effect for directors and shareholders of distressed businesses, particularly where the company may still be capable of an orderly, solvent sale or wind-down. Businesses could face:
- Reduced attractiveness of an early, orderly exit (where solvency is still achievable): If a business can be sold, restructured, or closed on a solvent basis, a higher CGT rate may reduce the net proceeds available to shareholders and dampen appetite for a timely transaction.
- Incentive to delay decisions (increasing risk): Where owners are weighing a sale, incorporation, or solvent wind-down, the higher CGT rate from April 2026 may encourage some to “hold on” in the hope of improving value. For genuinely distressed businesses, delaying decisive action can increase exposure to creditor pressure, worsen cash flow, and heighten the risk of wrongful trading and other director conduct concerns.
- Less flexibility when funding a turnaround: In some situations, directors/shareholders may plan to realise value from assets or shares to inject funds, settle liabilities, or support a managed restructuring. A higher CGT charge can reduce the net funds available, limiting options at a critical point.
Timing matters
Business disposals that finalise before 6th April 2026 may still benefit from the lower 14% rate if they fall in the 2025/26 tax year, so careful scheduling of transactions and documentation is crucial. If you are exploring a full or partial sale of your business ahead of the upcoming CGT changes, our corporate finance team can guide you through every stage of this process. You can read more about how we can assist in selling your business here.
If you are a director or shareholder seeking advice on the future of your business in light of these tax changes, our expert team can support and advise you through the best decision for your business.
Get in touch with our team today to see how we can help.
