Tina Harris, a partner and specialist in corporate tax advisory at Azets, has advised business owners to reassess their company structures, especially if they are contemplating a sale.
This recommendation comes in light of recent increases in Capital Gains Tax (CGT) rates applicable to shares in trading companies, with further tax rate hikes for Business Asset Disposal Relief (BADR) set to take effect next April.
Harris emphasised the importance of prompt action for company owners contemplating a sale, stating that they should “act immediately”.
She noted that there are “legitimate” strategies available to mitigate the impact of rising taxes.
Introduced in the 2008/09 tax year, Entrepreneurs’ Tax Relief aimed to incentivise the establishment of businesses in the UK by reducing the CGT rate on qualifying disposals.
Under this relief, qualifying individuals enjoyed a reduced CGT rate of 10% when selling shares in their personal trading companies, compared to the standard rates of 18% or the higher rate of 28%.
The scheme underwent significant changes in 2018, when it was renamed BADR. The conditions were tightened, and the lifetime allowance was reduced from £10m ($13.45m) to £1m.
Harris commented: “For many years there was a 10% effective rate of Capital Gains Tax that owner managers could benefit from on sale/retirement, but this ended on 5 April 2025, when the rate increased to 14% with the main rate of CGT having increased to 24% from 30 October 2024.
“However, from next April, the rate of tax where BADR applies will be 18%.
“In less than ten years the CGT payable on £2m of qualifying gains has more than doubled.
“We want to highlight this and get people thinking about their options well in advance of any sale.”
Harris indicated that those who are most likely to benefit from such advice include shareholders of trading companies planning to sell within the next one to five years, individuals with shareholdings exceeding £1m, or those who have more than they intend to spend in their lifetime, as well as people wishing to benefit family members from the sale proceeds.
She added: “Business Asset Disposal Relief has been a factor that has influenced how company ownership is structured. People have kept companies outside of a group structure so they can sell them separately, they have given 5% of the shares in their companies to spouses and, in some cases, other family members.
“People with valuable companies need to determine whether their company structure still works for them, given these changes, particularly if their shareholdings are worth more than £1m and more than they would want/need to spend.
