For many business owners, selling a business represents the culmination of years, or even decades, of hard work. Naturally, the value of the business and the terms of the deal will be major considerations. However, the tax position can also have a significant impact on how much of the eventual sale proceeds you retain.

With the Autumn Budget approaching, Capital Gains Tax (CGT) is likely to remain an area of interest for business owners.

There has been ongoing discussion around the future direction of CGT and whether, at some point, the gap between Capital Gains Tax and Income Tax rates could narrow further. While no such change has been confirmed for the Autumn Budget, understanding what a change in rates could mean can be useful if selling your business is already part of your plans.

The important point is not to make decisions based on speculation, but to understand your position and be prepared.

How does Capital Gains Tax apply when selling a business?

Capital Gains Tax can arise when an individual sells or disposes of an asset that has increased in value. This can include the sale of shares in a company or the disposal of all or part of a business.

For the 2026/27 tax year, the main rates of Capital Gains Tax for individuals are 18% and 24%, depending on the individual’s taxable income and gains.

The actual tax position on a business sale will depend on a range of factors, including:

• how the business is owned
• whether shares or business assets are being sold
• the original cost of the investment
• the availability of reliefs
• the seller’s wider tax position
• the structure and timing of the transaction

This means two business sales with the same headline value can result in very different tax outcomes.

Could Capital Gains Tax rates change?

Tax rates and reliefs can change at any Budget, and it is not possible to know what will be announced until the Chancellor delivers the Autumn Budget.

One potential area that is sometimes discussed is whether Capital Gains Tax rates could move closer to Income Tax rates.

There is currently a significant difference between the main CGT rates and the higher rates of Income Tax. If that gap were reduced in the future, the amount of tax payable on a substantial business disposal could increase considerably.

It is important to stress that this is not a confirmed policy change and business owners should not make commercial decisions based solely on speculation about future tax rates.

However, where a business sale is already being considered, it can be helpful to understand the potential impact of different tax scenarios.

What could a higher CGT rate mean for a business sale?

A simple example demonstrates why tax planning can become particularly important when selling a business.

Consider a business owner who realises a taxable gain of £2 million on a sale.

If, purely for illustration, the entire £2 million gain were taxable at the current main CGT rate of 24%, the tax liability would be:

£480,000

If the same gain were hypothetically taxed at 40%, the tax liability would be:

£800,000

That represents a difference of:

£320,000

At a hypothetical rate of 45%, the tax liability would increase to:

£900,000

That would be £420,000 more than a 24% tax charge.

These figures are deliberately simplified to demonstrate the potential effect of a change in tax rates. They do not take account of the Annual Exempt Amount, Business Asset Disposal Relief, the individual’s other income or gains, previous disposals, transaction structure or any other available reliefs.

They do, however, illustrate an important point. For owners selling valuable businesses, changes in tax rates can have a material effect on the amount they ultimately retain from a transaction.

What about Business Asset Disposal Relief?

Business Asset Disposal Relief, often referred to as BADR, can reduce the rate of Capital Gains Tax payable on qualifying business disposals.

From 6 April 2026, qualifying gains are subject to CGT at 18%. This follows an increase from 10% to 14% from April 2025, followed by the further increase to 18% from April 2026.

There is currently a £1 million lifetime limit on qualifying gains.

Whether a business owner qualifies for BADR depends on meeting a number of conditions. For example, where shares are being sold, requirements apply to the company, the individual’s shareholding and their relationship with the business.

Eligibility should therefore be considered well ahead of a proposed sale. Identifying an issue shortly before completion may leave considerably fewer options than addressing it as part of longer-term exit planning.

Should you bring forward a business sale because of the Autumn Budget?

Tax should rarely be the sole reason for accelerating or delaying the sale of a business.

A successful exit involves much more than the applicable tax rate. Valuation, the right buyer, deal structure, commercial terms, personal objectives and future plans all need to be taken into consideration.

If you are already considering a sale, however, the possibility of future tax changes provides another reason to understand your position sooner rather than later.

Early advice can help you understand what your likely tax exposure would be under the current rules and consider how alternative transaction structures or future changes could affect your net proceeds.

It also means that if tax rules do change, you are in a much stronger position to assess what those changes actually mean for you.

Planning ahead for the sale of your business

Ideally, tax and transaction planning should begin well before a buyer is found or heads of terms are signed.

Depending on your circumstances, early planning could include:

• estimating the potential gain and resulting tax liability
• reviewing whether you are likely to qualify for Business Asset Disposal Relief
• reviewing the ownership and shareholding structure
• considering the potential tax implications of different deal structures
• identifying issues that could affect a future transaction
• considering your personal financial and estate planning objectives
• understanding how much you may ultimately retain after tax

Early planning does not mean committing to a sale. It simply gives you greater visibility over your options.

How Ad Valorem can help

Selling a business can be one of the biggest financial transactions an owner will undertake.

Our team can work with you before, during and after the transaction to help you understand both the tax and commercial implications of a sale.

Preparing for a future sale

If an exit is on the horizon, we can review your existing position, help identify potential tax issues and consider whether any planning should be undertaken ahead of a transaction.

This can include reviewing your potential Capital Gains Tax exposure, eligibility for available reliefs and the implications of different ownership or transaction structures.

Supporting you throughout the sales process

Our involvement does not need to stop once a buyer has been found.

We can support you throughout the sales process, working alongside your wider professional advisers as the transaction progresses.

This can include support with:

• financial and tax due diligence
• responding to buyer enquiries
• reviewing financial and tax information provided as part of the transaction
• considering the tax implications of the proposed deal structure
• reviewing relevant provisions within the Sale and Purchase Agreement
• helping to identify potential tax risks or exposures
• supporting negotiations where tax or financial matters arise

Having advisers who already understand both you and your business can help provide continuity throughout what can often be a complex and demanding process.

Don’t predict. Prepare.

Nobody can know what will be announced in the Autumn Budget until the Chancellor delivers it.

The possibility of future changes to Capital Gains Tax should therefore not be a reason to panic or rush into a transaction.

But if selling your business is already part of your plans, there is value in understanding your position now.

Knowing the likely value of your business, your potential tax exposure and the reliefs that may be available can help you make better informed decisions, whatever happens in the Budget.

Considering selling your business?

Whether an exit is imminent or still several years away, early planning can make a significant difference.

Speak to the Ad Valorem team about preparing for a future business sale and how we can support you throughout the transaction.

(E) enquiries@advaloremgroup.uk (T) 01908 219100 (W) advaloremgroup.uk