If you own an HVAC business and have been thinking about selling, there is a tax change coming in April 2026 that you should understand. Business Asset Disposal Relief, commonly known as BADR and formerly called Entrepreneurs' Relief, is increasing from 14 per cent to 18 per cent. The change takes effect on 6 April 2026, and it will affect the amount of tax you pay on the gain from selling your business.
This article explains what BADR is, how the change affects HVAC business owners in practical terms, and how to think about it sensibly without letting a tax deadline drive a bad decision.
A Brief History of BADR
Business Asset Disposal Relief has been around since 2008, originally under the name Entrepreneurs' Relief. It was designed to encourage business ownership by providing a reduced rate of capital gains tax when business owners sell. For years it sat at a flat 10 per cent, which meant that qualifying gains on business sales were taxed at 10 per cent rather than the standard capital gains rate of 20 per cent (or 24 per cent for higher rate taxpayers from April 2024).
The Autumn Budget 2025 changed this. The Chancellor announced an immediate increase from 10 per cent to 14 per cent, effective from the Budget date itself. A further increase to 18 per cent was announced for 6 April 2026. The lifetime limit remains at £1 million of qualifying gains.
Do You Qualify?
Not every business owner qualifies for BADR. The conditions are specific and all must be met for a continuous period of at least 2 years ending on or after the date you sell your shares.
- You must own at least 5 per cent of the ordinary shares in the company
- Those shares must carry at least 5 per cent of the voting rights
- You must be a director or employee of the company
- The company must be a trading company (which an HVAC business will be)
- You must have held the shares and met the other conditions for at least 2 years
If you are the founder and sole director of your HVAC business, and you have owned it for more than 2 years, you almost certainly qualify. But check with your accountant. There are edge cases, particularly around shareholding structures and whether the company is treated as a trading company, that can affect eligibility.
The Numbers: Worked Examples
Let us look at what the rate change means in real terms for HVAC business owners at different sale values. For simplicity, these examples assume the full gain qualifies for BADR (i.e., within the £1 million lifetime limit).
Scenario 1: £400,000 Qualifying Gain
At 14 per cent (current rate): £56,000 tax.
At 18 per cent (from April 2026): £72,000 tax.
Difference: £16,000 more tax after April 2026.
Scenario 2: £600,000 Qualifying Gain
At 14 per cent: £84,000 tax.
At 18 per cent: £108,000 tax.
Difference: £24,000 more tax after April 2026.
Scenario 3: £800,000 Qualifying Gain
At 14 per cent: £112,000 tax.
At 18 per cent: £144,000 tax.
Difference: £32,000 more tax after April 2026.
The numbers are real and the increase is meaningful. But £16,000 or even £32,000 in additional tax needs to be weighed against the overall sale price. A rushed sale that achieves £50,000 less because the process was compressed does not save money; it costs it.
For Gains Above £1 Million
BADR only applies to the first £1 million of qualifying gains over your lifetime. Any gain above that threshold is taxed at the standard capital gains rate, which is currently 24 per cent for higher rate taxpayers. If your business sale generates a gain significantly above £1 million, the BADR rate change affects only a portion of the total tax liability. For a £1 million gain, the difference between 14 per cent and 18 per cent is £40,000.
The Timing Question
The most common question we are hearing from HVAC business owners right now is: should I try to complete before April 2026?
The honest answer depends on where you are in the process.
If you are already well advanced in a sale process, with heads of terms agreed and due diligence under way, it may be realistic to push for completion before 6 April. Your broker and solicitor can advise on whether this is achievable without compromising the deal.
If you have started conversations but nothing is agreed, it may be possible to accelerate, but be cautious. Compressing the timeline creates pressure, and buyers know that sellers working to a tax deadline have less negotiating power. A buyer who knows you are trying to hit a date may offer less, knowing you are more likely to accept.
If you have not started the sale process at all, it is almost certainly too late. A typical HVAC business sale takes four to six months from instruction to completion, and that assumes everything goes smoothly. Trying to compress that into weeks is unrealistic and risks producing a poor outcome.
Perspective: Tax Is Not the Only Factor
The BADR rate change is a material consideration, but it is one factor among many. The overall sale price, the deal structure, the quality of the buyer, the terms of the handover, the treatment of your staff, and the long-term implications for your business all matter more than a few percentage points of tax.
Consider this: if rushing to complete before April means accepting an offer that is £50,000 lower than you would have achieved with a properly run competitive process, you have not saved money. You have lost money. The tax saving on a £400,000 gain is £16,000. The lost value from accepting a lower offer could be multiples of that.
The right approach is to use the BADR change as one input in your decision-making, not as the decision itself. If the timing works and you can complete before April without compromising the outcome, that is ideal. If it does not, a well-prepared sale completed in the summer or autumn of 2026 at the right price will almost certainly leave you better off than a rushed sale at the wrong price completed in March.
What To Do Now
- Speak to your accountant to confirm your BADR eligibility and understand the tax implications for your specific situation
- If you are already in a sale process, discuss the timeline with your broker
- If you are not in a process, use this as the prompt to start thinking seriously about your exit
- Get your accounts in order and understand your business's current valuation
- Do not let the deadline drive you into a decision you are not ready for
Getting Started
If you would like to understand how the BADR change affects your specific situation, and whether the timing is right for a sale, we are happy to have a confidential conversation. We can give you a realistic assessment of your timeline options and help you make an informed decision.
