The 2024 Autumn Budget and UK Business Exits: What Changed and What It Means

The October 2024 Budget was the most significant reset for UK business exit taxation in over a decade. If you were planning to sell in 2026 or 2027 and hadn't revisited your numbers since the announcement, you are likely working from the wrong tax assumptions. The changes to Capital Gains Tax, Business Asset Disposal Relief, Employee Ownership Trusts, and Inheritance Tax Business Property Relief affect the net proceeds of almost every owner-managed business sale. And the cumulative impact on a £10m or £20m exit is substantial.

Table of Contents

What changed to Capital Gains Tax on business assets?

From 30 October 2024, the main rates of CGT on business asset disposals rose immediately. The lower rate (previously 10% under BADR) was not affected on that date. That change came separately. But the standard CGT rates for gains above the BADR threshold moved from 10% and 20% to 18% and 24% for residential property, and the rate applying to business asset gains outside BADR moved to 24%.

For most owner-managers selling a trading business, the relevant rate outside of BADR relief is now 24%. That is a meaningful increase from the previous 20% headline rate, and it compounds with the BADR changes below.

What happened to Business Asset Disposal Relief?

This is where most owner-managers feel the sharpest change. BADR. Formerly Entrepreneurs' Relief. Had already been cut from a £10m lifetime limit to £1m back in 2020. The October 2024 Budget left the £1m limit in place but raised the tax rate that applies to gains within it:

  • From April 2025: BADR rate rises from 10% to 14%
  • From April 2026: BADR rate rises again to 18%

The practical effect is that the relief still exists, but it is worth less each year. By April 2026, a seller using the full £1m BADR allowance will pay £180,000 in CGT on that first £1m of gain, compared to £100,000 under the pre-Budget rate. That is an additional £80,000 in tax on the BADR-covered portion alone.

For gains above £1m. Which is the case in the vast majority of meaningful business sales. The standard rate of 24% applies to the remainder.

This article contains general information only and does not constitute financial or tax advice. Every business sale is different. Speak to a qualified UK tax adviser about your specific situation before making any decisions.

How did the EOT rules change?

Employee Ownership Trusts had become an increasingly popular exit route, partly because qualifying sellers could receive proceeds free of CGT. The October 2024 Budget retained the CGT exemption but tightened the qualifying conditions and reduced the attraction in several ways:

  1. Former owners are now excluded from being beneficiaries of the EOT for the first tax year after sale.
  2. New rules on "exit events" mean that if the EOT disposes of the business within ten years of acquisition, HMRC can claw back the CGT relief.
  3. Trustee obligations have been strengthened, with greater personal liability for trustees who breach conditions.
  4. Vendor loan note structures used to fund the purchase price face tighter scrutiny on interest and repayment terms.

The EOT route still offers a genuine CGT exemption and remains a viable succession option. Particularly where the owner values continuity and employee welfare alongside the financial outcome. But the structuring now requires more rigorous planning, and any adviser suggesting an EOT primarily as a tax vehicle without genuine succession intent is likely to find HMRC takes a close interest.

What changed with Inheritance Tax Business Property Relief?

Until the Budget, Business Property Relief allowed qualifying business assets to pass on death free of IHT, with no cap. From April 2026, BPR will be capped at £1m per individual at the 100% relief rate. Assets above that threshold will attract IHT at 50% of the standard 40% rate. Effectively a 20% IHT charge on business value above £1m.

This change matters most to owners who were planning to hold the business until death rather than sell, treating BPR as their succession plan. For a business worth £5m held personally, the IHT exposure above the £1m threshold is now £800,000 (20% on £4m), which did not exist before. It also affects business owners who hold property, shares, or other assets qualifying for BPR alongside the main trading company.

What does this mean in pounds on a real exit?

The table below models the cumulative CGT impact of the Budget changes on three exit scenarios, assuming the seller has used their annual CGT exempt amount and the full £1m BADR allowance, with the remainder taxed at the standard rate. These are illustrative figures only.

Exit ValuePre-Budget CGT (approx.)Post-April 2026 CGT (approx.)Additional Tax
£5m net gain£980,000£1,060,000£80,000
£10m net gain£1,880,000£2,100,000£220,000
£20m net gain£3,780,000£4,260,000£480,000

Figures assume £1m BADR-qualifying gain, remainder at headline CGT rate. Pre-Budget: 10% on £1m, 20% on balance. Post-April 2026: 18% on £1m, 24% on balance. These are simplified illustrations. Your actual liability will depend on deal structure, reliefs, and personal circumstances. Take qualified tax advice.

At a £10m exit, the difference in net proceeds after CGT is over £200,000. At £20m, it approaches half a million pounds. These are not rounding errors.

Does this change your exit timeline?

If you were planning to sell in 2026 or 2027 and assumed you had time, this is the part worth reading carefully.

The BADR rate at 14% applies from April 2025. If you complete a sale before April 2026, you lock in the 14% rate on the BADR portion rather than 18%. That is a relatively modest difference on £1m of gain (£40,000). But the broader point is that CGT rates on business disposals are now higher than they have been since 2010, and there is no structural reason to expect them to fall under the current government.

A typical owner-managed business sale in the UK mid-market takes 9 to 18 months from the point of instructing advisers to completion. Working backwards from a target completion date matters.

If you want to complete before April 2026, you needed to start the process by mid-2025 at the latest. Many owners in that window have already moved. If you are targeting completion in 2026, the process should be live now.

Here is a realistic timeline for an owner-managed business sale in the £5m–£25m range:

  1. Months 1–2: Appoint advisers, prepare management information, indicative valuation work
  2. Months 3–4: Prepare information memorandum, approach longlist of buyers
  3. Months 5–6: First-round bids, select preferred parties, Heads of Terms
  4. Months 7–10: Due diligence, legal drafting of Share Purchase Agreement
  5. Months 11–14: Negotiation, conditions to completion, completion mechanics
  6. Months 14–18: Completion and post-completion adjustments

Delays are common. Deals that look straightforward at Heads of Terms frequently encounter issues in due diligence. Particularly around customer concentration, property leases, TUPE obligations, and management team dependency.

FAQ

Does BADR still exist after the Budget? Yes. The £1m lifetime limit remains and the relief still applies. The rate increased to 14% from April 2025 and will rise again to 18% from April 2026. It is worth less than it was, but it still reduces CGT meaningfully on the first £1m of gain.

Is an EOT still a viable exit option after the Budget changes? Yes, for the right business. The CGT exemption is still in place. The conditions are tighter and the structuring more complex, but a genuine employee ownership succession remains a credible route. Particularly in professional services, manufacturing, and care businesses where continuity matters.

Does the IHT BPR cap affect me if I am planning to sell rather than hold? If you complete a sale before death, IHT on BPR is not directly relevant to the proceeds. It matters most to owners treating the business as a long-term hold or as part of their estate planning. If you hold other BPR-qualifying assets, the cap could affect those too.

Are the CGT rate increases permanent? There is no way to know. What is certain is that the current rates are law, and planning should be based on what is known today, not on speculation about future governments.

I have not formally valued my business. Does that affect my exit planning? Yes. You cannot make a credible tax planning decision without a baseline sense of what your business is worth. EBITDA multiples vary significantly by sector, growth profile, and deal structure. Without a realistic valuation, any tax modelling is speculative.

What should I do first if this Budget has changed my thinking? Get a credible indicative valuation, then sit down with a UK tax adviser to model the after-tax proceeds under current rules. Once you have those two numbers, you can make a rational decision about timing and structure.

Get a baseline valuation

If the Budget has prompted you to revisit your exit timeline, the most useful first step is understanding what your business is realistically worth today. The Succession Group valuation calculator gives you an indicative EBITDA-based valuation range in a few minutes, based on current UK mid-market transaction data for your sector.

Use the free valuation calculator →

This article contains general information only and does not constitute financial or tax advice. Every business sale is different. Speak to a qualified UK tax adviser about your specific situation before making any decisions.