The latest budget announcement has introduced significant changes to Business Asset Disposal Relief (BADR), with capital gains tax (CGT) rates rising to 14% initially and further increasing to 18% by April 2026. For small and medium-sized enterprise (SME) owners, these shifts are more than just policy updates—they could significantly influence exit strategies, valuations, and M&A activity across the SME sector. Now is the time for business owners to reassess their plans and explore whether a pre-2026 exit is the right choice.
What these changes mean for SME owners
The timing of a business sale has always been critical, but the upcoming CGT rate increases make it even more so. For many SME owners, the decision to sell represents the conclusion of years of dedication, financial investment, and personal sacrifice. The new rates add an extra layer of complexity to an already nuanced process.
For example, consider a family-owned business valued at £2 million, with equal ownership between two spouses. Under the current tax structure, selling the business now would result in a lower CGT liability compared to waiting until the 18% rate comes into effect. Delaying the sale could lead to an additional £160,000 in taxes—funds that might otherwise be allocated to reinvestment, retirement, or family financial planning.
However, while these tax increases may incentivise accelerated sales, it’s crucial to avoid letting tax considerations dominate your strategic decisions. Rushed transactions motivated purely by tax savings can result in a lower business valuations and, in some cases, regret over lost potential for growth or impact.
Strategic approaches for SME owners
The rise in BADR rates presents both a challenge and an opportunity. For those contemplating an exit, careful planning and strategic decision-making will be essential to maximise returns. Key considerations include:
- Market dynamics: Is the current market environment conducive to achieving an optimal sale price?
- Business preparedness: Are your financials, operations, and growth projections in order to attract serious buyers?
- Long-Term vision: Does selling now align with your personal and professional goals, or would waiting offer greater fulfilment and opportunities?
For some business owners, these changes may warrant alternative strategies such as phased exits, partial sales, or even restructuring. These options could help balance immediate tax implications with broader business and personal objectives.
Making informed decisions
The updated BADR landscape underscores the importance of proactive planning. SME owners must weigh the financial and emotional aspects of a potential sale against the evolving tax environment. Consulting with us can provide clarity on complex decisions, offering strategies that mitigate tax impacts while supporting long-term goals.
We understand that selling a business is more than a financial transaction—it’s a deeply personal decision. Our team is here to help you navigate this transitional period with confidence, ensuring that every step is informed by holistic planning and a commitment to achieving the best possible outcomes. Whether you’re ready to sell now or need guidance on structuring your business for a future exit, we’re here to support you every step of the way.