The Autumn Budget 2024 has brought significant changes to the tax landscape, shaping new challenges and opportunities for those considering selling their businesses. As the market recalibrates, it is essential to understand how these changes might influence a sale strategy.
The headline adjustment for business owners is the increase in Capital Gains Tax (CGT) rates. From April 2025, CGT rates for Business Asset Disposal Relief (BADR)—critical for those selling their businesses—will rise incrementally from the current 10% to 14%, and subsequently to 18% by 2026. While the lifetime allowance of £1 million remains unchanged, this increase reduces the net proceeds for many business sellers. Angel investors and private equity stakeholders face parallel increases, reducing returns on their investments. Also, reforms to National Insurance and corporate tax thresholds will tighten margins for potential buyers, making business valuations and financing more complex. For smaller enterprises, however, the expanded Employment Allowance offers some relief, potentially easing operational costs for buyers.
With heightened tax burdens, sellers may encounter reduced valuations as buyers adjust their offers to reflect higher future costs. However, the upside lies in increased clarity post-budget, allowing sellers to at least plan more effectively. For sellers aiming to optimise their returns, early preparation is critical. Engaging advisors to explore potential reliefs or restructuring options—such as timing the sale to maximise current tax benefits—can make a significant difference.
Despite challenges, strategic sellers may find opportunities in this evolving landscape. If you’re contemplating selling your business, now is the time to assess how these changes impact your specific circumstances. Professional guidance will be invaluable in navigating these complexities while positioning your business effectively in the market.
Selling a business should be a decision driven by strategic, long-term considerations rather than reacting to short-term tax changes.
Unless you were already in an advanced sale position in the weeks leading up to the budget, I was certainly not advising companies to sell just because of the potential tax change. According to Mark to Market it is believed there were c350 additional sale deals completed in the month of the budget. What I would be more concerned with will have been the potential lack of due diligence carried out, the deal values chipped at the last minute and the clauses agreed or not agreed in sale and purchase agreements that in the months and years to come could be much more of an issue than a saving on tax.
There are several reasons why I believe a medium/longer term view should be taken and preparation and early engagement with advisors is key. The benefits from clear planning and making changes and enhancements to the business and ultimately the financial performance, can enhance the sale price far more than any short-term tax saving:
Market Dynamics Over Taxes
While tax policies influence net proceeds, they are only one factor in a broader equation. Market conditions, such as industry demand, competition, and buyer interest, often play a more significant role in determining the value of a business. Selling solely in response to higher taxes might mean missing out on better valuation opportunities in a more favourable market
Business Growth Potential
Businesses are often worth more as they grow and stabilise. If your company is on an upward trajectory or positioned in a growing industry, holding onto it longer could yield a significantly higher sale price. Short-term tax costs could pale in comparison to the gains from a more valuable business in the future.
Timing and Buyer Readiness
The best sales often occur when both the business and the market are ready. Rushing to sell due to immediate tax implications might result in compromises, such as accepting lower offers or selling to less-qualified buyers. A well-prepared exit strategy ensures maximum return, even if it involves weathering higher taxes
Tax Policy Can Shift Again
Tax changes are inherently political and subject to reversal or adjustment by future governments. Making a major decision based on a transient policy could mean locking in lower proceeds without benefiting from potential future reforms. For example, while CGT rates have risen, successive budgets may introduce reliefs or thresholds to offset this impact.
Selling a business is a significant life and financial decision. While the Autumn Budget 2024 has introduced challenges, aligning your sale with broader business goals and personal aspirations often outweighs the short-term tax considerations. Strategic planning, market timing, and professional advice are key to achieving the best outcome.
If you or your clients wish to have a completely independent initial chat about potentially selling their business, then please contact us. We offer the following services around the exit from a business:
- Exit Strategy and Planning
- Company Valuations
- Exploring Alternatives such as an MBO or an EOT
- Review of the business to consider enhancements to the financials and business model to enhance the valuation and price
- Finding a buyer
- Producing a sales memorandum
- Full Sales Process from strategy to deal completion
As Snowball we have advised on more than £28m of company exits in 2024 and offer a totally independent service. Within our team we have experience on both sides of the deals, as both a seller and a buyer, providing a unique perspective for those wishing to potentially sell their business.