Directors who are planning to close their solvent company through a Members Voluntary Liquidation (MVL), and who qualify for Business Asset Disposal Relief (BADR), can still benefit from the 18% rate of Capital Gains Tax, but with the BADR lifetime limit falling from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027, and with the first distribution in an MVL usually taking several weeks, now is the time to make up your mind, act and talk to a Licensed Insolvency Practitioner.
The change was announced by the Chancellor, John Healey, in his Budget on 28 October 2026. The 18% rate is unchanged, so an MVL with BADR still remains a tax-efficient way to extract retained profits from a solvent company, and for Shareholders with qualifying gains above £500,000, timing now matters.
What is changing with Business Asset Disposal Relief?
BADR has become steadily less generous over the last two years, with the rate rising from 10% to 14% in April 2025 and then to 18% in April 2026, and now it is the BADR lifetime limit for each Shareholder that is being cut, halving from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. The 18% rate is unchanged, and gains above the BADR lifetime limit will be taxed at the main Capital Gains Tax rate of 24%. Legislation will be introduced in the Finance Bill 2026.
How much can a Members Voluntary Liquidation with BADR still save a shareholder?
An MVL is a formal process for closing a solvent company, allowing shareholders to extract retained profits in a tax-efficient way, and where BADR applies, the Capital Gains Tax rate on qualifying distributions made during the MVL is 18%. Taking the same retained profits out as dividends would mean paying 35.75% as a higher rate taxpayer, or 39.35% as an additional rate taxpayer, at the 2026/27 rates*, so the saving from an MVL with BADR is still considerable.
(*The tax and dividend rates mentioned in this article can be changed by the Government over time and should not be relied on to make any decisions. You should consult your tax advisor before taking any action.)
On a qualifying gain of £500,000, the tax at 18% is £90,000, and that stays the same before and after 6 April 2027. On a qualifying gain of £1 million, a higher or additional rate taxpayer with their full BADR lifetime limit unused pays £180,000 under the current rules, but from 6 April 2027 only the first £500,000 is taxed at 18%, with the remaining £500,000 taxed at 24%, taking the total to £210,000. That is £30,000 of extra tax on the same gain.
Who needs to act before 6 April 2027?
The Chancellor said the BADR Lifetime Limit change will mean no changes for about 75% of claimants. The Shareholders who need to make their minds up now are those with qualifying gains above £500,000, and those who have already used part of their BADR lifetime limit. Previous BADR claims count towards the new, lower limit, so a Shareholder who has already used a substantial part of their £1 million may find there is little or no BADR left after April 2027.
How soon should an MVL process be started?
The Members Voluntary Liquidation process involves formal steps, including the appointment of a Licensed Insolvency Practitioner, statutory declarations, and asset distribution, and it can take several weeks before the first distribution is made. For Shareholders with qualifying gains above £500,000, that is now important, because the new limit applies to qualifying disposals made on or after 6 April 2027.
The relevant date for BADR purposes is not the date of Liquidation; it is the date on which the Shareholder receives a capital distribution out of the Liquidation.
Leaving it late risks a distribution not being made before 5 April 2027. Antony Batty & Company advises Directors who are looking to close their solvent company to begin planning now, to ensure distributions are made in time.
Talk to us about an MVL and BADR
If you are a Shareholder who has been thinking about closing your solvent company through a Members Voluntary Liquidation, now is the time to talk to us. We are not tax advisers so you should consult your accountant as to whether you qualify for BADR.
Antony Batty & Company has completed hundreds of MVLs since we started in 1997, and our team of Licensed Insolvency Practitioners, with over 25 years of experience, can guide you through every stage of the process. The initial consultation is free and without obligation. Contact us at any of our offices:
- London: 0208 088 0633
- Brentwood: 01277 554 002
- Salisbury: 01722 512 001
- Bournemouth: 01202 923 009
- Thames Valley: 01235 507 001
- Mill Hill: 0208 906 7730
Frequently asked questions about MVLs and BADR
What is the new BADR lifetime limit?
The lifetime limited is currently £1 million but will fall to £500,000 for qualifying disposals made on or after 6 April 2027, The 18% tax rate is unchanged.
Can I still benefit from BADR in an MVL after 6 April 2027?
Yes. BADR will still reduce the Capital Gains Tax rate on qualifying distributions made during a Members Voluntary Liquidation to 18%, but only on qualifying gains up to the new £500,000 lifetime limit.
Who qualifies for BADR in an MVL?
Shareholders must have held shares for at least two years, be an officer or employee of the company, and the company must be a trading entity.
Is BADR guaranteed in an MVL?
No. Shareholders must meet the qualifying conditions, and BADR is claimed via the individual’s self-assessment tax return. Antony Batty & Company cannot guarantee that BADR will apply, and Directors should check their own position with their tax adviser.
Do previous BADR claims count towards the new limit?
Yes. Previous BADR claims count towards the newly reduced lifetime limit.
What happens to gains above the BADR lifetime limit?
They are taxed at the main Capital Gains Tax rate of 24%.
How long does an MVL take to make the first distribution?
It can take several weeks, which is why Directors with qualifying gains above £500,000 should begin planning now.
