What do directors need to know about Autumn Budget MVL changes?

What do changes to Business Asset Disposal Relief mean for directors?

Changes to Business Asset Disposal Relief, as announced in the Autumn Budget 2026, means if you plan to close a solvent company via a Members' Voluntary Liquidation after 6 April 2027, you could face a larger Capital Gains Tax (CGT) bill. While the CGT rate remains unchanged at 18%, the lifetime limit on qualifying gains will be reduced to £500,000 from 6 April 2027.

How this affects you depends on whether you qualify for BADR, your overall tax position, and how much relief you have already claimed (if any).

Before deciding on an MVL, work through these points with your Insolvency Practitioner:

• Are you eligible for BADR?
• Have earlier disposals used up part or all your current £1 million allowance?
• Do you plan to continue trading after April 2027?

How you answer these questions will help decide whether closing a company before April 2027 could reduce the tax you pay.

BADR and MVLs: how the relief applies

Business Asset Disposal Relief (BADR) lowers the rate of Capital Gains Tax you pay on distributable profits when closing a solvent company. As distributions in an MVL count as capital rather than income, they fall under Capital Gains Tax instead of Income Tax. Where BADR applies, qualifying gains are taxed at 18%, and there is a lifetime limit of £1 million, cut to £500,000 from 6 April 2027.

A timeline of Business Asset Disposal Relief

Since Entrepreneurs’ Relief became BADR in 2020, the tax relief has been steadily reduced. In April 2020, Entrepreneurs’ Relief was renamed Business Asset Disposal Relief, with the lifetime cap cut from £10 million to £1 million, and it will now fall to £500,000. The BADR rate rose from 10% to 14%, and then 18% in April 2026, but remained unchanged in this Budget.

Closing your company before 6 April 2027 - why timing matters

Directors who want to close a solvent company under the current £1 million cap should start planning now. Planning when assets will be disposed of and when distributions will be paid lets you forecast your tax position.

Making contact early gives your accountant and Insolvency Practitioner the time to run the process properly. This starts with a declaration of solvency and settling debts in full. The Insolvency Practitioner then examines company assets, liabilities, records, and tax affairs.

What if an MVL isn’t the right option for your company?

Whether an MVL is right for you depends on whether your company is solvent, the value of retained profits, and whether you want to close the company.

Your company has limited reserves - If the amount left to distribute is less than £25,000 dissolving the company through strike-off may be more cost-effective.  

Your company can’t pay its debts in full - If you can’t pay creditors in full in 12 months, a Creditors’ Voluntary Liquidation (CVL) may be more appropriate.

You want to sell, rather than close - You may consider selling your company, which may achieve better returns.

Founders’ Relief: a new relief for ambitious businesses

The Budget also proposed Founders’ Relief, a new relief for fast-growing and high-turnover businesses. From 6 April 2028, qualifying founders will pay Capital Gains Tax at 10% on up to £10 million of gains over their lifetime. The proposed conditions include an annual turnover of at least £10 million and a workforce of at least 15 full-time employees.

Few owner-managed limited companies will meet these thresholds, so BADR is likely to remain the more relevant relief for most directors.

Speak to a licensed Insolvency Practitioner

If you want to plan a Members’ Voluntary Liquidation before 6 April 2027, speak with a licensed Insolvency Practitioner. If you’re unsure which route is right for you, take our 60-second test, or contact a member of our team to understand your options.