Q: I’m thinking about selling my business, which I’ve owned for five years. How will the upcoming tax changes affect me?
A: You’re right to identify there are relevant upcoming rule changes for people in your position.
These alterations mean people who sell their businesses will have to pay more tax than before. The reforms in question surround the Capital Gains Tax rate and Business Asset Disposal Relief.
The latter is effectively a special discount on tax for people who sell their businesses. Instead of paying a high tax rate, they get to pay a lower tax rate on up to £1 million of their profits.
From 6 April 2025, the CGT rate under BADR is increasing from 10% to 14% on the first £1 million of lifetime gains. This means you‘ll pay more tax when selling your business (assuming it qualifies under the rules). Part of eligibility is that you‘ve owned it for at least one year, which is clearly fine in your case.
It sounds like your business will count as a qualifying business. It has to be one that you own and run yourself and must be trading – i.e. it sells goods or services to make money. It can‘t just be for investment, like renting out property.
Some mixed-use businesses also qualify. That is to say, your business does both trading (selling goods or services) and providing rental income, like a shop with an apartment above it.
The thing you should bear in mind is that, although the rules are less favourable now than if you‘d sold, for example, a year ago, you face paying even more if you delay a year. If you delay beyond April 2026, the rate looks likely to rise even further, bringing it closer to standard CGT rates of 18% or 24% for higher earners. In fact, it has already been stated in the Budget that it will rise again in April 2026 to 18%. If you‘re considering a sale, it may be worth reviewing your plans now to take advantage of the lower rate before it increases. If you‘d like to discuss the matter further, please get in touch with our team.
