Key takeaways:
- Lord Livermore’s comments on the potential to align Capital Gains Tax with Income Tax at the Autumn Budget has heightened concerns amongst business owners.
- The Autumn Budget will be held on Wednesday 28th October 2026.
- Three CGT changes are being speculated about: changes to BADR, aligning CGT with income tax rates, or increasing CGT rates.
- These changes are currently speculation, and the current CGT and BADR rules remain in place.
- A Members’ Voluntary Liquidation (MVL) can currently offer a tax-efficient exit, with qualifying gains potentially benefiting from the 18% BADR rate.
- The timing of an MVL distribution could be important if new tax rules are introduced.
- If you are considering closing your solvent company, reviewing your options with a licensed insolvency practitioner before the Autumn Budget could give you greater clarity.
If you are thinking about closing your company through a Members’ Voluntary Liquidation (MVL), you may be wondering whether possible Capital Gains Tax changes could affect the amount you take away after tax. While nothing has been confirmed, there is growing speculation ahead of the Autumn Budget that could make business owners reconsider their timing.
What are the potential Capital Gains Tax changes being discussed?
There is growing speculation that three potential changes may be made to Capital Gains Tax (CGT) at the 2026 Autumn Budget.
- Abolition of Business Asset Disposal Relief (BADR).
BADR is designed to reduce the CGT payable on certain qualifying business disposals. For qualifying gains arising from disposals on or after 6 April 2026, the BADR rate is 18%, subject to the relevant qualifying conditions and the individual’s lifetime limit.
There is speculation that Business Asset Disposal Relief (BADR) could be abolished as part of wider CGT reform. This would mean that gains currently qualifying for BADR would no longer benefit from the rate reduction of 6% (24% down to 18%) and would be subject to CGT at its full rate of 24%.
For now, the existing rules remain in place but for company owners who are already considering an exit or closure, the potential changes make it particularly important to understand the current position and how an MVL could affect their tax liability before deciding what to do next.
- Aligning CGT rates with income tax rates.
Under current legislation, an MVL involves distributing any assets left over after settling business liabilities (qualifying capital distributions) between shareholders. These capital distributions are generally treated as capital rather than income, meaning CGT may apply rather than Income Tax.
However, one of the key areas of speculation is whether CGT rates could be aligned to Income Tax rates. Currently, CGT is charged at 18% (basic rate taxpayers) or 24% (higher or additional rate taxpayers). Higher rate taxpayers who qualify for BADR will receive a 6% relief, bringing their CGT rate down to the basic rate of 18%.
This is considerably lower than the higher (40%) and additional (45%) rate of Income Tax, meaning the tax payable on a gain can differ significantly depending on whether it’s taxed as CGT or Income Tax.
This is why an MVL is used as a tax efficient way of closing a solvent company but if CGT rates were increased or brought closer to Income Tax rates, the potential tax advantage to shareholders receiving gains as capital distributions would be reduced or removed.
- CGT facing an increase.
A third possibility is a more straightforward increase to the existing CGT rates.
Rather than completely aligning CGT with Income Tax, the Government could increase the current rates of 18% and 24% to a higher level. This would increase the tax payable when a business is sold or value is extracted from a company.
What do these potential changes mean for business owners?
Although the details are not yet known, all three possibilities could make the tax cost of liquidating a solvent company higher:
| Potential change | Possible impact |
| Abolition of BADR | Qualifying gains would lose the benefit of the reduced BADR rate. |
| CGT aligned with income tax rates | Some gains could potentially be taxed at 40% or 45%. |
| CGT rates increased | More tax could be payable on capital gains. |
A reminder that the above changes are speculative, but for business owners who are already considering selling or closing their company it is advised to speak with a licensed insolvency practitioner to better understand current legislation and review their options before the Autumn Budget.
Why could these changes matter if you are closing your company?
When a company is closed through a Members’ Voluntary Liquidation (MVL), a licensed insolvency practitioner is appointed to deal with the company’s affairs, settle any outstanding liabilities and distribute the remaining assets to shareholders. These distributions are generally treated as capital distributions, meaning CGT will apply rather than Income Tax.
Where the relevant conditions are met, it may also be possible to claim BADR, which reduces the CGT rate on qualifying gains from 24% down to 18%.
This is where the proposed changes could become significant.
If BADR were abolished, CGT rates were increased or brought closer to Income Tax rates, the tax payable on the same gain could be considerably higher and decrease the tax efficiency of an MVL.
How could the tax cost change?
If, for example, a shareholder had a £500,000 qualifying gain, under the current 18% BADR rate, the CGT would be:
- £500,000 × 18% = £90,000.
If BADR were removed and the gain were instead taxed at the current higher CGT rate of 24%, the same gain would result in:
- £500,000 × 24% = £120,000.
That is a £30,000 difference in this simplified example.
If CGT rates were increased further or aligned with higher-rate income tax, the potential difference could be greater still.
This example is for illustrative purposes only. The actual tax payable will depend on your personal circumstances, including any available allowances, gains, losses, shareholdings and whether you qualify for BADR.
Why timing is key
One of the key questions for anyone already considering an MVL is whether starting the process before the Budget would protect them from any future tax changes.
The answer depends on when the capital distribution is made and when any new rules take effect.
For CGT purposes, HMRC states that the date of a capital distribution from a liquidation is the date the shareholder receives, or becomes entitled to receive, that distribution.
As our Director of Insolvency, Stacey Phipps, explains:
“The key point is that the tax treatment generally depends on when the distribution is made, rather than simply when the company enters liquidation.
In an MVL, we would normally look to distribute the majority of the available surplus to shareholders within the first few days of the process. So, if a company enters liquidation before the Budget and the distribution is made before any new tax rules take effect, the current tax treatment would apply to that distribution.”
This means the timing of distributions can be particularly important where tax changes are announced.
For example, where a company enters an MVL before the Budget and the liquidator is able to make the relevant distribution before any new tax rules take effect, the current rate would apply to that distribution.
However, the right course of action for you will depend on the proposed closure date, the legislation introduced and its effective date, so company owners should take advice based on their individual circumstances and not assume that entering an MVL automatically protects them from future changes.
With you for life’s big moments
Closing a company is a big decision, and the possibility of changes to the tax rules can make it feel even more uncertain.
If you are already thinking about what comes next, you don’t have to have all the answers just yet. Our accountancy and insolvency team can talk through your plans, explain what the potential changes could mean for you and help you understand the options available under the current rules.
There is no need to make a decision based on speculation. But if you are considering an MVL, having a conversation sooner could give you more time to make the right decision for you and your company before the Autumn Budget.
Whatever the next chapter looks like, we are here to help you work through it.
