Budget 2026: Healey reduces threshold for Business Asset Disposal Relief

Chancellor John Healey has reduced the threshold for Business Asset Disposal Relief in Capital Gains Tax from £1 million to £500,000, aiming to provide no changes for three out of four claimants. He also introduced a new relief called 'Founder's relief' in Capital Gains Tax, offering a 10 percent rate on lifetime gains of up to £10 million for the founders of successful firms.

Healey explained that starting a business involves risks, and successful founders should be recognized and encouraged to stay in the UK to invest again. Malli Kini, a partner at Blick Rothenberg, praised the new founders' relief as a bold and welcome move, potentially making the UK a more attractive place to start and grow a business.

However, critics noted that the devil is in the detail, as the qualifying conditions might be too narrow, affecting long-standing family businesses and smaller owner-managers. Under current rules, Business Asset Disposal Relief cuts CGT on selling a business up to 18 percent on up to £1 million of gains over a lifetime, with the rate set to increase further.

Industry figures have warned that this change will significantly increase the tax burden of small businesses, which are already struggling with rising energy costs and employee wages. Healey confirmed no further changes to tax on income from dividends and employment.