Could selling your business now save you thousands in UK tax?
If you’re a business owner considering an exit, timing has never been more critical. With upcoming changes to Capital Gains Tax (CGT) set for April 2025, selling your business before this deadline could save you up to £40,000 per shareholder. The key to securing this tax advantage lies in the benefits offered by Business Asset Disposal Relief (BADR)—a vital tool for business owners seeking to minimize their tax liability during the sale of their business.
BADR, formerly known as Entrepreneurs’ Relief, currently allows eligible business owners to reduce the CGT rate on the disposal of their business assets from the standard 24% to just 10%. This rate reduction applies to a lifetime limit of £1 million in qualifying gains for sales completed after March 2020, allowing potential tax savings of up to £140,000 per shareholder. However, with upcoming budget changes, the CGT rate under BADR will increase from 10% to 14%, reducing the maximum potential tax saving to £100,000—an immediate £40,000 increase in your tax liability per shareholder.
To take advantage of the current CGT savings, it’s essential to act now. A successful business sale can often take six months or more from valuation to finalising the sale, so beginning this process as soon as possible is crucial.
The benefits of valuing your business now
Starting with a current, accurate valuation of your business is the first essential step. Valuing your business in advance not only helps you understand its current worth but also strengthens your position when negotiating with prospective buyers. A professional valuation provides a realistic snapshot of what your business can command in today’s market, helping you secure the best possible deal.
With valuation completed, you can plan how to present your business most attractively. This includes documenting financials, reviewing and strengthening any assets, and creating a clear narrative of the business’s strengths and future potential. By showcasing your business’s value now, you’ll be in a better position to attract quality buyers and negotiate on favourable terms.
Finding a buyer before time runs out
Securing a buyer is often the most time-intensive part of a business sale, and the process can stretch for several months or even longer. The sooner you begin, the more likely you’ll be able to complete your sale and benefit from the current CGT rate. A strong business presentation, financial transparency, and professional marketing of your business’s unique selling points will make it easier to attract and engage serious buyers.
One option is to work with a corporate finance adviser, like us here at RPGCC, who can help streamline this process for you. It’s what we do.
A qualified Corporate Finance adviser can connect you with a network of potential buyers and guide you through every stage of the sale, from initial interest to closing. Given the limited time before the tax change, leveraging their expertise can be invaluable to expedite the transaction.
Consider the timeline: Why does selling a business takes so much time?
It’s essential to understand that the process of selling a business is typically neither quick nor straightforward. On average, a sale can take between four to six months from the time of listing to the final transfer of ownership, with some sales taking even longer. Key steps like valuation, due diligence, negotiations, and legal clearances require careful handling, each adding to the overall timeline.
Valuation and Preparation: Initially, time is needed to conduct a thorough business valuation, assemble financial statements, and prepare any necessary documentation. Ensuring your records are complete and up-to-date can prevent delays and build trust with prospective buyers.
Due Diligence: Once you have interested buyers, they will conduct their own due diligence—a detailed assessment of your business’s financial health, operations, and legal standing. This process can last several weeks to several months, as buyers seek to ensure they fully understand the business they’re purchasing.
Negotiation and Finalisation: After due diligence, the negotiation process begins. Here, key terms, price, and conditions of the sale are discussed, leading to the final purchase agreement. Any complications in negotiations or legal requirements can further extend the timeline.
Given these steps, aiming to close the sale before April 2025 means starting now.
An early start will not only increase the chance of a successful sale but also secure the existing BADR tax benefit, avoiding the additional 4% tax that will come into effect after 6 April 2025.
What are the financial benefits of selling your business before 6 April 2025?
The current Business Asset Disposal Relief structure offers business owners a unique opportunity for significant tax savings, provided the sale is completed before the new budget changes take effect. By selling under the current rate, you could save up to £40,000 in capital gains tax per shareholder. After April 6, 2025, this tax benefit will shrink, reducing your potential tax savings from £140,000 to £100,000 per shareholder.
For many business owners, this tax saving represents a significant portion of their retirement or reinvestment funds. Planning to sell now, rather than waiting, provides a clear financial advantage. It’s an opportunity to maximize the returns from years of hard work and to secure a more stable financial future.
The benefits of using a corporate finance team to sell your business
As the above insights illustrate, selling your business can be a time-consuming, stressful experience. Here are the benefits of using a corporate finance advisor to run the sale process:
- Allows you to focus on running the business and keeping performance on trend – continuing the trend can make a significant impact on the final price you receive
- Selling your business can be a stressful, emotional experience – a good CF advisor takes this stress away from you wherever possible
- Good CF advisors have both wide-ranging sale experience and industry contacts – this can often include warm leads into potential acquirers
- Experienced CF advisors will know how best to structure a deal, in the most tax efficient way
- This experience also allows them to negotiate the highest possible price
- You will have someone acting on your behalf that is highly motivated to get you the best possible sale price
Take action to secure your tax savings today
If you’re considering selling your business, timing is everything. With only a few months remaining before the CGT rate change, the urgency to act cannot be overstated.
The corporate finance team at RPGCC has extensive experience in guiding business owners through the sale process, ensuring a smooth transaction from start to finish. By reaching out now, you can learn more about Business Asset Disposal Relief and the steps needed to begin your business sale.
Contact Matthew Burns at RPGCC (mburns@rpgcc.co.uk) to discuss your options, receive a business valuation, and start the process, or call us on 020 7870 9050. With time running out, starting today will maximise your chances of completing a successful sale before the tax increase—protecting your hard-earned investment and securing your financial future.
