Potential business sellers need to act quickly before the upcoming increase in Business Asset Disposal Relief (BADR), according to a leading corporate lawyer.

Previously known as Entrepreneurs’ Relief, BADR allows qualifying business owners to pay a reduced Capital Gains Tax (CGT) rate of 10% on disposals. However, Chancellor Rachel Reeves announced in her autumn Budget that this rate will rise to 14% from 6th April 2024, with a further increase to 18% from 6th April 2026.

With these changes approaching, business owners considering a sale are encouraged to move forward with their plans to maximize tax savings before the higher rates take effect.

Business Asset Disposal Relief is applicable to various disposals, including assets of a sole trader, interests in a partnership, trust assets, and shares in a private trading company.

Kim Klahn, a partner in the corporate team at national law firm Clarke Willmott LLP in Birmingham, who has advised numerous owner managers on mergers and acquisitions, says the April increase will inevitably affect the retirement and reinvestment strategies of many business owners, prompting them to look at disposing of their company ahead of the change.

“There was speculation that BADR may even be abolished in the Autumn Budget so the CGT increases that have resulted are not as drastic as many had feared,” says Kim Klahn.

“We therefore expect to see increased activity among some owner managers wanting to take advantage of the current BADR rates in the first quarter of 2025. We also expect that a lot of people will be looking to invest their money following an exit – and this could boost deal activity from an investment and fundraising perspective.

“There may also be more interest from shareholdings selling into an Employee Ownership Trust, which is CGT exempt. Being aware of key dates in a deal is critical for tax purposes, so it is important for our clients to be aware of the incoming changes and when they will take effect.”

Businesses looking to buy or sell ahead of the introduction of any new measures should visit Clarke Willmott’s specialist legal advice on business exit strategy and sales page.

Clarke Willmott is a national law firm with offices in Birmingham, Bristol, Cardiff, London, Manchester, Southampton and Taunton.