Are you a shareholder in a small business? Do you have plans to sell or transfer your business? Is it time to bring forward your exit plan? Starting next tax year, small business owners and those eligible for Business Asset Disposal Relief (BADR) will experience increased tax rates. In fact, an increase already happened in April 2025, whereby the Capital Gains Tax (CGT) rate increased from 10% to 14% if you were selling a qualifying business.
It may be a good idea to consider whether you should sell now to save on tax and possibly bring forward your exit plan. And if selling isn’t on your agenda right now, it’s worth exploring what steps you can take to adapt to the upcoming changes in Capital Gains Tax (CGT).
The Clock Is Ticking on Capital Gains Tax
Currently, BADR gives qualifying shareholders a discounted CGT rate of 14% on the first £1 million of lifetime gains. This is already up from the 10% rate applied before October 2024. The changes were announced in the October 2024 Budget
But it gets steeper from here, in April 2026, that rate will rise to 18%.
For clarity, suppose you are the majority shareholder in a family business and are considering selling it, resulting in a £1 million chargeable gain.
- Sell today = £140,000 CGT
- Sell after April 2026 = £180,000 CGT
So, as things stand today, you are looking at a £40,000 difference in tax between the two tax years.
So BADR is a great relief for business owners and you can find the full criteria here
Selling Before 2026
This looming tax increase is prompting many business owners to bring forward their exit plan. Selling before April 2026 lets you:
- Lock in lower CGT rates
- Maximise net sale proceeds
- Avoid last-minute market pressure
With the mergers and acquisitions market gaining momentum, now might be the perfect time to consider selling your business. If you’ve been thinking of hanging up your tools, then give us a call today. Reach out to your normal manager, and we can discuss your options and the best approach moving forward.
Buyer Demand Is Booming
When tax changes are announced, deal activity often increases significantly, and this trend is evident once again.
In the last quarter of 2024, mergers and acquisitions values increased from £6.7bn to £8.6bn (as per the Office of National Statistics). This momentum is anticipated to carry into 2025 as interest rates are falling and investors queue for high-quality businesses.
For you as a small business owner, this increased demand means:
- Faster deals
- More competitive offers
- Stronger valuations
So could it be time to bring forward your exit plan?
What Happens If You’re Not Quite Ready to Take that Exit Plan Leap?
Not every business owner is ready to exit. If you’re still growing, or simply not ready to let go, there are steps you can take to prepare smartly for the future and possibly reduce your eventual tax bill.
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Bring in Additional Shareholders Strategically
BADR provides £1 million in relief per person, so by introducing a spouse, adult children, or trusted partners as shareholders, you can potentially lower your tax liability.
For example, two qualifying shareholders = £2 million of gains eligible for BADR.
But here’s the catch: the new shareholder must have owned shares for at least two years before the sale to qualify. That means:
- You’ll need to act well ahead of time before selling.
- The shareholding must be substantial and meaningful (at least 5% of shares and voting rights in most cases)
- The individual must be actively involved in the business, such as a director or employee
- The main activity of the business is to trade.
This isn’t a quick fix, but it’s a robust long-term strategy if you’re planning ahead.
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Start Succession Planning Early
If you’re handing the business over to family or employees, early planning gives you time to:
- Structure the ownership to maximise tax efficiency
- Train successors and build leadership stability
- Prepare the business for due diligence and future valuation
Even if you delay selling, being proactive now can pay off when the time comes.
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Work With an Adviser on Tax Strategy
The tax landscape is changing rapidly. An experienced tax adviser can:
- Review your current ownership structure
- Model different exit scenarios
- Help you take advantage of all available reliefs and exemptions
In some cases, restructuring the business or using trusts might offer alternative paths to reduce CGT.
How can we help you?
If you’re considering selling your business, whether now or later, the upcoming changes to the Business Asset Disposal Relief (BADR) should encourage you to take action today. It’s essential to start planning your sale or long-term strategy.
Selling your business is not just a financial decision but also a personal one. In the current economic climate, timing is crucial. If you’re not ready to sell yet, use this opportunity to review your ownership structures. Consider bringing in potential new shareholders early and developing your succession plan.
We have years of experience in this area. We are serious about you and your ambitions and are committed to looking after your financial affairs, ensuring that you take the right steps towards your own goals and ambitions.
If you are not a client of the firm as yet, please email enquiries@myersclark.co.uk give brief details of your goals and your business, and we can arrange a meeting.