Managing higher Capital Gains Tax on Business Asset Disposal

From April 2025, the Capital Gains Tax (CGT) rate for Business Asset Disposal Relief (BADR) is increasing, meaning business owners could face higher tax bills when selling their companies.

With rates rising to 14% in 2025 and 18% in 2026, planning ahead is crucial.

If you’re a business owner and thinking about selling up in the next few years, you’ll want to pay close attention to the latest tax changes.

Here’s what you need to know.

What’s changing?

Currently, eligible business owners benefit from a reduced 10% CGT rate when they sell their business under BADR (previously known as Entrepreneurs’ Relief). However, the Government is now increasing this tax rate, meaning you’ll keep less of your gains when you sell.

The changes:

April 2025: CGT rate rises to 14%

April 2026: CGT rises again to 18%

What will this look like:

If you were to sell your shares in your qualifying trading company for a gain of £1m, assuming any annual exemptions have already been used, this is what your profits would look like pre-April 2025:

Tax payable at 10%:                  £100,000

Funds remaining:                      £900,000

However, following the tax changes, if the sale takes place in 2025/26 you will be paying an extra £40,000 in CGT and if the sale takes place from April 2026 an additional £80,000 would be payable.

Who does this affect?

BADR applies to owner-managed businesses where the seller meets these key conditions:

• They own at least 5% of the company’s shares and voting rights.
• They have been a director or employee of the business.
• They have held their shares for at least two years before selling.

If you meet the criteria and are planning to sell your business, the upcoming tax hike could significantly impact your profits.

Why act now?

With the tax set to rise, many business owners are likely to accelerate their exit plans to secure the current 10% rate before April 2025.

Whether you’re considering a management buy-out, share sale, or full business sale, now might be the right time to explore your options.

But, beware…

The Government has introduced rules to prevent business owners from rushing sales purely for tax reasons. If you exchange contracts before April 2025 but don’t complete the sale until after, you could still be subject to the higher tax rate, unless you can prove the deal was commercially driven.

What’s next?

If you’re thinking about selling your business, planning ahead is essential. With the BADR changes looming, now is the time to:

• Review your exit strategy and business valuation.
• Speak with an accountant or tax advisor to understand your options (like us!).
• Ensure any planned sales are structured correctly to minimise tax liability.

Get in touch with us for help with navigating these changes.

Give us a call on 01872 267 267, email us contact@whyfield.co.uk, or message us on WhatsApp 0777 49 39 111

Get notified of our latest blog posts, along with lots of other good stuff, over on our socials:

Instagram | LinkedIn | Facebook | YouTube