Capital Gains Tax Changes Ahead

What Business Sellers Need to Know

Upcoming changes to capital gains tax (CGT) rules in the UK are prompting many business owners to reconsider the timing of their exit plans. With tax rates on Business Asset Disposal Relief (BADR) due to rise, exiting before April 2026 could offer significant financial advantages.

Major Tax Changes

From 6 April 2026, the CGT rate applied to qualifying business disposals is set to increase once again, following a previous hike in October 2024. These changes could substantially reduce the net proceeds received by business owners when selling their companies.

With BADR having already been increased from 10% to 14%, and then to 18% in 2026, the effective tax rate on lifetime gains is nearly doubling in just two years. For many small and medium-sized enterprise (SME) owners, this significantly alters the exit plans they had previously built around more favourable tax treatment.

Business owners looking to secure maximum value from their exit now face a reduced window to act. The most immediate benefit of selling before the 2026 deadline is locking in today’s lower CGT rate. Delaying could mean handing over tens of thousands of pounds more to the tax authorities.

Increased Market Activity Ahead of Tax Changes

While the looming tax hikes might deter some, there are also surges in mergers and acquisitions (M&A). Historically, tax changes drive a short-term spike in deal activity, as buyers and sellers aim to complete transactions before new rules take effect.

The last quarter of 2024 saw a notable uptick in deal-making, with a reported 7,492 completed business sales – up 11% from the previous year.

This environment creates a competitive landscape where well-prepared businesses can attract stronger offers and achieve quicker exits. Importantly, buyers understand that once CGT increases, sellers may adjust their expectations, potentially complicating negotiations. As such, many investors are eager to act while tax conditions remain more favourable.

Stronger Valuations in a Competitive Market

One often overlooked advantage of a seller-friendly market is the potential for higher valuations. When buyer interest is high, sellers can negotiate better terms, not just in terms of price but also in earnouts, retention packages, and overall deal structure.

As one might expect, valuation multiples typically rise when investor confidence grows. For high-performing, well-managed businesses, the current climate presents an opportunity to secure premium offers. Delaying a sale past April 2026 could expose business owners to lower valuations, particularly as higher CGT rates eat into the perceived value of the deal.

Get Exit-Ready: Why Planning Now Matters

Beyond tax considerations, acting now allows business owners to carefully plan their exit.

Whether selling to a third party, transitioning to internal management, or passing the reins to family, early planning ensures a smoother transition. Preparing the business for sale involves legal and financial readiness, operational reviews, staff communication, and risk mitigation. All of this requires time.

A well-prepared exit not only eases the process for sellers but also reassures potential buyers and investors that the business is stable and scalable post-sale.

A Strategic Time to Consider Selling

Recent sentiment among UK business owners reflects the shifting landscape: 65% are now exploring a sale. The government’s CGT policy changes will fundamentally reshape the financial implications of an exit, adding as much as £40,000 in tax per £1 million sold.

In such an environment, timing becomes a critical element of any exit strategy. The next 18-months represent a period of increased opportunity, with strong buyer interest and current tax rules combining to create ideal conditions for sellers.

Need Support with Your Exit Strategy?

If you’re considering selling your business and want to make the most of current market conditions before the upcoming tax changes, we’re here to help. Whether you need guidance on timing, valuation, or structuring your exit, get in touch with us at [email protected] and we’d be happy to support you.