For many company directors, a Members’ Voluntary Liquidation (MVL) remains one of the most tax-efficient ways to extract retained profits when closing a solvent business. However, recent changes to Business Asset Disposal Relief (BADR) have significantly altered the landscape—and timing has never been more important.
If you didn’t act before the latest deadline, you’re not alone. But the key message now is simple: plan ahead for 2027 and beyond.
What is an MVL and Why Does BADR Matter?
An MVL is a formal process to wind up a solvent company, allowing shareholders to extract funds as capital rather than income. More info here
Where BADR applies, directors pay a reduced Capital Gains Tax (CGT) rate on distributions—historically making MVLs highly attractive compared to dividend taxation.
A Timeline of Change
The government has introduced phased increases to BADR rates, reducing the overall tax advantage:
- Up to April 2025: 10% CGT
- April 2025 – April 2026: 14% CGT
- From April 2026 onwards: 18% CGT
This means the tax cost of extracting profits through an MVL has steadily increased—and will continue to impact directors exiting in the 2026/27 tax year and beyond.
Missed the Deadline? Here’s What It Means
To benefit from the 14% rate, directors needed to make distributions before 6 April 2026.
In reality, many directors missed this window. That’s not surprising:
- MVLs take time to plan and implement
- Professional advice is required
- Commercial decisions don’t always align with tax deadlines
As a result, many business owners now face the new 18% BADR rate for disposals going forward.
The Real Cost of Waiting
While a 4% increase may not sound significant, it can have a substantial impact:
- On £100,000 of gains → £4,000 extra tax
- On £500,000 → £20,000 extra tax
- On £1 million → £40,000 extra tax
For many directors, that difference represents years of retained value.
Why 2027 Planning Starts Now
Although the April 2026 deadline has passed, the bigger issue is what comes next.
There is no guarantee that 18% is the final rate. Governments have already shown a clear direction of travel—gradually reducing the generosity of BADR.
That means:
- Future rate increases are possible
- Reliefs and qualifying conditions could tighten
- The government is already strengthening anti-avoidance rules
Waiting without a plan could expose directors to further tax risk.
Key Considerations for Directors
If you’re thinking about closing your company in the next 12–24 months, now is the time to review:
1. Timing
Even though the 14% window has closed, forward planning is critical to avoid being caught by future changes.
2. Eligibility for BADR
Ensure you meet the key criteria:
- Minimum 2-year shareholding
- Officer or employee status
- Trading company status
3. Commercial Position
An MVL should always be commercially appropriate—not purely tax-driven.
4. Alternative Exit Routes
Depending on your situation, alternatives such as restructuring or phased exits may be worth exploring.
The Bottom Line
Yes—the ideal deadline has passed.
But the real takeaway isn’t about what’s been missed. It’s about what comes next.
With BADR now at 18% and uncertainty beyond 2027, directors who plan early will retain control over their exit strategy—and their tax position.
Those who don’t may simply be reacting to the next change.
How DCA Business Recovery Can Help
If you’re considering closing your company or want to understand how BADR changes could affect your exit, taking advice early can make a significant difference to your outcome.
At DCA Business Recovery, we support directors with:
- Planning tax-efficient exits, including MVLs
- Assessing eligibility for BADR
- Timing decisions to maximise value
- Navigating the full liquidation process from start to finish
If you’d like to discuss your options, speak to our team in confidence today on 01702 344558 or email enquiries@dcabr.co.uk.
