Exit planning and the Autumn Budget: why some business owners should consider selling now

In the first of a three-part series, Linzi Wilson looks at the impact of the 2024 Autumn Budget on Exit planning for business owners. This week, Linzi focuses on business owners considering exiting a business in the next one to two years and highlights why they might want to speed up that process.

The 2024 Autumn Budget kept many Corporate Finance specialists very busy right up until Chancellor Rachel Reeves set foot outside 11 Downing Street. For business owners planning to sell up in the next one to two years, the Budget might have caused them to think they had missed out. However, there are several reasons why a sale within the next six months could be beneficial. 

What does the reduced tax advantage from Business Asset Disposal Relief (BADR) mean for exit planning?

For business owners considering an exit between 2025 and 2026, the increase in BADR is a motivation to sell soon. Completing a sale before 5 April 2025 will save owners 4% in tax ahead of the BADR rate change. The resulting tax saving could be significant, particularly if your anticipated gain from a business sale would be around the current £1m threshold.

The recent Budget also hinted that the Labour government may be inclined to reduce further or modify tax reliefs around capital gains. While there is no evidence to suggest further changes are in the pipeline, there is equally no guarantee that existing reliefs will remain as they are beyond 2025.

Therefore, if your business exit timeline is within the next 12 to 24 months, a quicker sale could be advantageous.

How will Business Property Relief affect business exits?

Previously, Business Property Relief (BPR) meant that those holding shares in unlisted trading companies on death would not be subject to IHT on the value of those shares, such that holding on to shares until death could make sense from a tax perspective. As full relief will be limited to the first £1m of value from 6 April 2026, it should result in more shareholders looking to sell earlier in life such that they can then engage in IHT planning with the proceeds of the sale.

Will the strong market for acquisitions continue into 2025?

As my colleague Craig Coyle outlined pre-Budget, the possibility of changes to Capital Gains Tax (CGT) catalysed increased market activity. The changes to BADR due in April 2025 could maintain that momentum. The big question, of course, is how long that momentum will last.

We can assume that the BADR change, much like the anticipated CGT increase, will provide further motivation to close deals. Therefore, business owners looking to sell might find the pool of available buyers diminishes after the 5 April 2025 deadline. In some sectors, the conclusion of just one or two deals might be enough to dry up the supply of potential buyers.

What impact will wider fiscal changes have on deal-making and exit planning?

Finally, we cannot overlook the potential impact of the increase in employer National Insurance payments. This increase in operating costs for businesses could lead to a tighter investment environment in the medium term. With less margin available, the appetite for acquisitions – or acquisitions at a fair price – could well diminish. Thus, leaving business owners seeking to exit in the next one to two years with fewer potential buyers and a general downward pressure on prices.

Any push to complete a deal quicker must not come at the expense of thorough due diligence, integration planning and comprehensive legal agreements. There is, however, justification to think business owners could benefit from a compressed timeframe and a completed sale in early 2025 or 2026.  

Are you considering selling your business?

Consilium provides comprehensive services for business owners and entrepreneurs looking to exit a business. From exit planning advice and due diligence to business valuations and help finding the right buyer, we are your trusted partner.

To arrange a confidential discussion, contact Linzi Wilson or learn more about our Exit planning, Business disposal and Due Diligence services.  

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