Firstly, the main rate of capital gains increased from 20% to 24% for sales completing on or after budget day. This was not nothing, but nowhere near as high an increase that was speculated in the press (some speculating it would be aligned with income tax rates as high as 40%).

Business Asset Disposal Relief (previously known as Entrepreneur’s Relief) remains available, with the lifetime limit (i.e. the limit of taxable gains that can qualify for the relief over an individual’s lifetime) remaining at £1m. However, the rate is increasing from 10% to 14% from next April, and then again to 18% the following April.

Therefore, this is a significant relief for sellers of trading businesses whereby a significant proportion of their proceeds will be covered by their lifetime limits (potentially deal values of around £2m if spouses also meet the qualifying conditions).

The relief will be useful for sellers of larger trading businesses too, however the benefit of this relief should be weighed up with the increased costs and compromises that can come with accelerating a sale. For context, the relief is only worth a maximum of £140k per individual (being £1m x (24% main rate of tax less the business asset disposal relief rate of 10%)), decreasing to £100k from next April (being £1m x (24% main rate less the business asset disposal relief rate of 14%).

The changes to Inheritance Tax reliefs may also have an impact on business owners and our Corporate Finance Team. At the very least, more business owners will be looking for valuations of their businesses to assess their Inheritance Tax exposure and utilise their reliefs as much as possible.

To recap, Agricultural Property Relief and Business Property Relief will continue to be at 100%, however, from April 2026, this will be capped at the first £1 million of combined agricultural and business assets on top of the existing nil rate bands. Unlike the existing nil rate bands, this £1m relief is not transferable between spouses. Therefore, business owners may want to make sure they leave a proportion of their business to their children instead of their spouse in their wills.

‘Freezer/growth‘ share planning may also be more popular. This allows shareholders to ‘freeze’ the value of their shares and allot a new ‘growth’ share class to their children, so that future capital growth is passed out of their estate. Accurate valuations are needed here, as HMRC will expect some ‘hope value’ to be attributed to the growth shares.

Also on the Inheritance Tax front, sellers will need to consider what they do with their proceeds after a sale. Up to now, a common Inheritance Tax planning strategy was to reinvest some of their proceeds into some lower risk AIM listed companies, and these investments would qualify for 100% Business Property Relief. Whereas, from April 2026, this will be limited to 50% relief.

Finally from me, Employee Ownership Trusts have become an increasingly popular exit route for owner managers. Very broadly, this involves the owner selling a majority of their business to a trust which is for the benefit of all employees. There are various benefits of using this structure, a significant one being that a sale to an employee ownership trust can be completely free of Capital Gains Tax.

The budget announced the government will move ahead with a package of reforms for Employee Ownership Trust transactions, mainly around ensuring these arrangements are genuinely for the benefit of employees. For example, by ensuring that the consideration that a trust pays does not exceed market value. Similarly to the Inheritance Tax changes, this again means accurate valuations are a must.