Budget 2026 for Business Owners: Capital Allowances, BADR and Founders' Relief

Capital allowances: who actually benefits?

The main-rate first-year allowance rises from 40% to 50% for qualifying spending on or after 1 January 2027, while the main-rate writing-down allowance falls from 14% to 12% from 1 April 2027 (6 April 2027 for income tax). Corporation tax stays at 25%, with a 19% small profits rate.

The catch: full expensing continues. Most limited companies buying qualifying new plant and machinery can already deduct 100% in year one, so the higher first-year allowance mainly helps sole traders, partnerships and some leasing businesses.

Example (simplified): a sole trader buys £100,000 of qualifying equipment after 1 January 2027. £50,000 is deducted in year one. The other £50,000 goes into the main pool and is written down at 12% a year, more slowly than before.

Leasing: anti-avoidance rules for lease-and-leaseback arrangements widened from 28 October 2026 to cover right-of-use leases as well as finance leases. If you use leasing, ask your accountant how this affects you.

Business Asset Disposal Relief (BADR): what is changing

What it is. BADR lets you pay a lower rate of capital gains tax when you sell qualifying business assets. Broadly, it covers:

• the sale of all or part of a business you run as a sole trader or partner;
• shares in your personal trading company, where you hold at least 5% of the shares and voting rights, are an officer or employee, and have met the conditions for at least two years; and
• certain assets sold after a business closes.

Whether you qualify depends on your own facts. Your accountant will confirm.

What is changing. The lifetime limit on gains that can benefit falls from £1 million to £500,000 for disposals on or after 6 April 2027. The BADR rate stays at 18%.

What it means in pounds. Because the standard higher rate on these gains is 24%, BADR now saves at most 6p for every £1 of gain. That is up to £60,000 per person today, falling to up to £30,000 from April 2027.

Example (illustrative, higher-rate taxpayer, no other reliefs or earlier claims): a £800,000 qualifying gain costs £144,000 in tax before the change. After it, £500,000 is taxed at 18% (£90,000) and £300,000 at 24% (£72,000), a total of £162,000, or £18,000 more. For gains of £1 million or more, the extra tax is up to £30,000.

Timing needs care. The new limit applies to disposals on or after 6 April 2027. Rules about contracts and completion dates can be technical, as they were when the BADR rate rose in April 2026, so do not assume that a sale "agreed" earlier qualifies.

Founders' Relief. The Chancellor announced a new relief taxing lifetime gains of up to £10 million at 10% for the founders of "our most successful firms". The qualifying rules, start date and interaction with BADR are not yet published in the sources we have seen. If it applies to you, the saving compared with a 24% rate could be large, so plan early.

Questions to take to your accountant:

1. Do I qualify for BADR today, and have I used any of my lifetime limit?
2. Would selling before or after 6 April 2027 change my tax bill?
3. Could I be a "qualifying founder" for the new relief?
4. Should my shareholding or structure change before a sale?
5. How would a members' voluntary liquidation or a management buyout be taxed?

Taking profits out

A new framework for taxing company distributions is reported to start on 6 April 2028. It aims to stop owners paying capital gains tax rates on profits that would otherwise face dividend tax. If you plan to close or exit a company, take advice early. Dividend tax rates have been 10.75% and 35.75% for basic and higher rate taxpayers since April 2026.

Funding growth

The National Wealth Fund and British Business Bank receive an extra £20.4 billion over four years, but there is no confirmed cut in what borrowers pay. Banks face a temporary increase in their profits surcharge from January 2027, and some lenders warn it could add to borrowing costs.

Asset finance, hire purchase and refinance can spread the cost of equipment while you claim allowances. We compare lenders on total cost, speed and flexibility. We can also help fund a management buyout or refinance ahead of an exit.

FAQs

Does the 50% allowance help my limited company? Possibly not. Full expensing already gives most companies 100% relief on qualifying new equipment.

Is BADR being abolished? No. The rate stays at 18%, but the lifetime limit halves to £500,000 for disposals on or after 6 April 2027.

When does Founders' Relief start? We have not seen a confirmed start date or definition. Check for updates.

This article is general information based on the Budget document and published reporting as at 29 October 2026. Details may change as legislation is published. Acorn.finance does not provide tax or legal advice. Take advice from a qualified accountant or solicitor before acting. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it. Finance is subject to status and lender criteria.