Following today’s government budget announcement, significant changes to Business Asset Disposal Relief (BADR) were revealed. These changes will impact business owners looking to sell in the coming years, if not months. It would be fair to say that our team at Business Partnership expected these changes, however unwelcome they may be.
Starting in April 2025, business owners will see an increase in the capital gains tax (CGT) rates applied to BADR, which could substantially impact the proceeds from their business sale. To provide some clarity on today’s announcement, I wanted to break down what this all means for business owners and why selling sooner may be advantageous for those considering it.
For business owners selling their businesses before April 2025, the current BADR setup allows for a reduced CGT rate of 10% on the first £1 million of lifetime qualifying gains. This relief is designed to reward entrepreneurs and long-term business owners, offering a substantial tax break for those looking to exit their businesses. Any gains beyond this £1 million threshold are currently taxed at the individual’s standard marginal CGT rate, which will likely rise to 24% for many due to recent rate changes.
From April 2025, the first wave of changes to BADR will come into effect, with the CGT rate on the initial £1 million of lifetime gains increasing from 10% to 14%. While this may not seem drastic, this 4% increase represents a potentially significant additional tax burden for business owners looking to maximise the net proceeds of their sales.
For example, if a business owner realises £1 million in qualifying gains, the difference between paying 10% and 14% could mean an additional £40,000 in tax.
The most substantial change occurs in April 2026, when the CGT rate on the first £1 million of qualifying lifetime gains under BADR is set to increase to 18%. This change effectively doubles the tax rate on these gains compared to the current rate, adding a considerable financial impact for business owners.
The progression from 10% to 18% over the next two years can represent a significant difference in the after-tax proceeds from a business sale, making it increasingly less advantageous to hold off on a sale if a business owner is nearing their exit.
Any gains exceeding the £1 million lifetime limit for BADR will continue to be taxed at the taxpayer’s marginal CGT rate. This rate has also seen increases, with the majority of taxpayers now facing a rate of around 24%. With higher CGT rates across the board, strategically planning the timing of a business sale becomes even more critical.
For business owners considering selling, these staged CGT increases make the next 18 months a critical period for planning. Selling before April 2025 allows business owners to benefit from the current 10% CGT rate on up to £1 million of qualifying gains. Delaying could mean losing out on a more favourable tax rate and potentially facing up to 80% higher tax on that initial £1 million of lifetime gains by April 2026.
The government’s BADR changes highlight the importance of forward-thinking financial planning. For business owners who have been contemplating a sale, the window for benefiting from the current 10% CGT rate is closing fast. At Business Partnership, our team is ready to guide you through this evolving landscape and help ensure that your exit strategy is well-timed and optimised for maximum value.
We understand the intricacies of selling a business, including the financial, legal, and strategic considerations involved in timing the sale to maximise value. Our advisors can help assess your business’s position, evaluate the potential impact of these upcoming tax changes, and determine the best approach to move forward.
Business Partnership Expands in Scotland with Appointment of New Partner for Edinburgh, Lothian and Borders
Business Partnership has strengthened its presence in Scotland with the appointment of a new regional partner, Cameron Young, who will cover Edinburgh, Lothian and the Borders.
A marketing and eCommerce expert, Cameron brings more than a decade of experience in business management across the consumer goods and luxury retail sectors. He began his career in his family business, where he played a pivotal role in increasing revenue and expanding its digital footprint. His leadership culminated in the successful negotiation and sale of the business in a multi-million-pound deal.
Following the acquisition, Cameron was invited to stay on by the acquiring corporate group, Create Better Group – a Dr Oetker company, later becoming Head of eCommerce. He subsequently held the role of Head of Marketing and eCommerce at Chisholm Hunter – one of the UK’s leading luxury jewellery and watch retailers – overseeing both online and in-store activity.
He has also served as a board member and consultant to a range of companies, advising on operational setup, marketing strategy and business development.
“I’m thrilled to apply my passion and experience to support clients of Business Partnership. My strategic management expertise, particularly in supporting businesses to achieve growth and prepare for sale, will be central to formalising exit strategies, conducting accurate valuations, identifying potential buyers and managing transactions from start to finish.”
The appointment of Cameron marks another step forward in our ongoing expansion in key regions across the country and further strengthens our pool of expertise in high-growth sectors such as eCommerce and digital marketing.
We are delighted to have bolstered our Midlands team with the appointment of a new regional partner covering Worcestershire, Gloucestershire, and Herefordshire.
Having worked at senior management and board level, Simon Glover brings a wealth of knowledge to the franchise role including experience of business sales, acquisitions, and succession planning.
Simon set up his first stationery business in 1996 at the age of 26, selling a range of items from a catalogue. He then moved into the printing industry and guided his company through many changes including the big leap forward into large format and signage.
A combination of organic growth and shrewd acquisitions ensured the business grew from start-up to more than £4 million. Since selling the company five years ago, Simon has focused on sharpening his skills as a sales and marketing consultant and has advised on many successful exits and acquisitions.
“As soon as I saw the franchise had become available, I thought it was perfect for me,” he said.
“It was a massive leap of faith but I’m really loving doing this role full-time and sharing my experience of the joys and potential pitfalls of selling a business.”
If you would like to connect with Simon, you can reach him on simon.glover@business-partnership.com(Opens new window) or connect on Linkedin.
We have boosted our operation in the North of England with the appointment of a new regional partner for West Yorkshire.
Leeds-based Philip Drazen (above) brings more than 35 years’ experience in advising companies on their route to exit to his new role. He will be assisted by business partners Nigel (right) and Tom Jones, who have worked in the refrigeration and air conditioning industry for over three decades and have considerable knowledge of owning, selling and buying businesses.
A former managing partner of a regional law firm, Mr Drazen is a well-known and respected figure in West Yorkshire and boasts a vast network of connections through his successful and continuing Business Exposure Groups and Entrepreneurs Club ventures.
“I’ve sold businesses for the last 22 years but have never done it with the support, infrastructure and database that Business Partnership provide as one of the largest independent companies in the sector,” he said.
Mr Drazen, who will be using his skills to focus on SME business to business sales, including traditional and tech companies, said that the pandemic has resulted in business owners falling into one of two camps.
“Many people have been re-energised as they have seen competitors disappear and are now planning to grow by acquiring businesses. However, there are a significant percentage who have re-evaluated their priorities and are now keen to sell. Both present myself and Business Partnership with lots of opportunities to guide them through a difficult and emotional process,” he added.
We are delighted to introduce Simon Tomkins as out latest Regional Partner to join us at Business Partnership.
Simon brings 30 years of sales experience to a rapidly expanding team of specialists spanning the UK from Devon to the Scottish Highlands.
Initially employed by a franchise operator, he moved to a multinational print hardware supplier before launching his own company in the same sector 17 years ago.
Based in Pulborough, first encountered Business Partnership while searching for a new business to buy and was impressed by their commitment to guiding buyers and sellers through the process and providing all the information both parties require.
“When the opportunity arose to join Business Partnership as a broker, I had evaluated many businesses from the perspective of a potential buyer and knew what I valued and what I didn’t,” he said.
“My experience and credibility in running a successful business will bring other skills to my new role, allowing me to meet the expectations of both sellers and buyers and manage sales professionally.”
The staycation saved the summer for many of us in 2020 and with the uncertainty caused by COVID-19 set to continue, it looks like summer 2021 could be a big year for the tourism industry in the UK. Vaccinations should enable restrictions to be eased for many countries during the summer, but with the risk of quarantine and changing international guidelines, it is likely that more people will be holidaying closer to home.
Improving Prospects for Tourism and Hospitality in Scotland
Tourism and hospitality were some of the hardest hit sectors during 2020 but they could soon be leading the way to recovery in Scotland. The social distancing measures that so many businesses have put in place over the last year will enable them to take advantage as soon as the weather warms up and restrictions start to ease. The Scottish government is prioritising tourism in its recovery plans and has a longer term strategy in place for building skills, improving transport, and ensuring sustainability in the sector. Visitor numbers are expected to be up for summer 2021, giving businesses across Scotland the chance to recover from the difficult months we have all endured.
Touring the NC500 in 2021
One of the best examples of how Scotland is preparing for a better 2021 is the North Coast 500 route. The NC500 is a 516 mile scenic route taking travellers in a loop around the Highlands from Inverness. Since its launch in 2015, the NC500 has generated £22.89 million for the Scottish economy and helped to create 179 jobs. Many hospitality businesses along the loop have also benefitted from increased visitor numbers. Businesses can pay to be listed on the official NC500 website, gain access to the initiative’s more than 150,000 social media followers, and are able to take advantage of various marketing and other opportunities. The scheme has been particularly praised for the support it has provided to businesses during COVID-19, with a 90% satisfaction rating from business owners.
The continued support provided by the NC500 this year should help these businesses to make a stronger recovery. In addition to providing advice and marketing opportunities, the NC500 has attracted a large audience and encouraged them to follow the route for themselves. Of those who had to cancel their plans to visit in 2020, about 75% intend to come during this year instead. British tourists are particularly likely to visit due to increased awareness of destinations in the UK and reluctance to plan holidays abroad. Good publicity from The Grand Tour putting the route on TV will help to draw people to the area, but the dramatic changes we’ve been through during 2020 have also had an effect. Being forced to look closer to home has left many people with a greater appreciation of the beauty, culture, and uniqueness of these regions.
Investing in Scottish Hospitality
The expected rise in visitors to Scotland will have a positive impact on many businesses this year and beyond. The ongoing support from the Scottish government and initiatives such as the NC500 will help the tourism and hospitality sectors to bounce back from their most difficult year. As businesses recover and business owners focus on the future, this should help to reinvigorate the market with increased demand. More buyers will be looking to invest in tourism and hospitality businesses in Scotland in order to take advantage of the growing interest in visiting destinations such as Inverness and in touring spectacular regions like the Highlands. The next few years will show how strongly the Scottish hospitality industry can recover.
If you are looking to invest in a hospitality business or purchase any other kind of business contact Simon or your local office for support.
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Iain McCoo, a board level finance professional, brings 30 years’ experience with global investment banks Lehman Brothers, Credit Suisse and Morgan Stanley and more recently pension and wealth planning sector know-how to his new role supporting business buyers and sellers in Romford and Southend-on-Sea.
Belfast-born Iain said: “After many years spent travelling with my job, I decided to step off the corporate treadmill and look for a new business to apply my skills to.
“Business Partnership were a natural fit as they share my values of trust, honesty, openness and transparency. I’m delighted to be joining the team and using my global experience and local knowledge to help clients achieve their goals.
“Having been involved in acquisitions and disposals, not all of which ran smoothly, I understand the potential pitfalls and what is required on all sides to overcome any obstacles. Communication and keeping a cool head are vital,” he added.
Iain spent his formative years in South Africa and has built and restructured businesses in the UK, Brazil and India.
When two businesses have the potential to go hand in hand, it makes perfect sense for them to establish a partnership that has practical value and benefits all involved. That’s why business sales experts Business Partnership have teamed up with coaching specialists Business Doctors in a collaboration to support SME business owners towards an exceptional exit.
Business Doctors specialize in delivering strategic advice and guidance to SME’s who are in need of support from experienced consultants. Passionate about giving something back, Business Doctors provide SME’s with vital services to aid their development. Some of the services they provide include strategic planning, fund raising and building business value – a service that stood out to Business Partnership, the business brokers.
When it comes to building business value, Business Partnership understands its importance, after all, they deal with buyers every day and understand what they look at when evaluating a purchase. BP’s primary focus is business sales, undertaking three roles for their clients who are looking to sell: valuations, acquisitions and business sales.
Paul Dodgshon, a Business Partnership franchisee went on to say “Our issue is that as franchisees, our focus is on business sales. A lot of the business owners we speak to are not quite ready for sale and need some coaching support to build their business value. Therefore, when we discovered that Business Doctors use the same Value Builder System within their coaching toolkit, it made sense to collaborate”
Matt Levington, Co-Founder of Business Doctors says: “We had exactly the opposite situation. Our franchisees work with some remarkable business owners throughout the UK to grow robust and profitable businesses, yet when a business owner wants to move on to something different or retire, we couldn’t’ help.”
The service providing a platform for both companies to work together is Value Builder, a tool designed to assess how valuable a business currently is. SME’s are provided with a benchmark score that enables them to evaluate their business and whether it’s ready to sell.
On the Value Builder collaboration, Business Partnership Chairman, Alistair Glaze, says that Business Partnership have been using the system “as part of their valuation and sales process for nearly a decade. It’s a fantastic system which our franchisees incorporate into their toolkit of knowledge when valuing and selling businesses.” Through the new collaboration with Business Doctors, Business Partnership clients’ looking to sell can be referred to an experienced consultant with the knowledge to increase SME value.
Business Doctors and Business Partnership have over 50 franchisees located from Inverness to Southampton and all places in between. This collaboration allows business owners to seamlessly step between brands that use a common language as their business matures.
“Knowing that a business will come to me through Business Doctors, having been professionally coached to a shared framework means it will have sound foundations, robust systems in place and be profitable. I know from the outset that such a business is more attractive to buyers and will achieve a higher sales multiple because of that work.” Says Business Partnership’s Paul Dodgshon. “Undoubtedly, the ultimate winner from this collaboration will be the business owners who benefit from this new joined-up service.”
The Covid-19 pandemic has had a huge effect on everyone in 2020, but it will continue to have longer-term effects as governments look for ways to address the unexpected spending and lost income, they have faced this year. One possibility that has been discussed in both the UK and the USA is increasing Capital Gains Tax to boost the public finances. If this goes ahead then it could have significant implications for business owners who are thinking about selling.
Capital Gains Tax Increases
Raising Capital Gains Tax is one of the options that the government is considering in order to cover the costs of the Covid-19 pandemic. A recent report from the Office for Tax Simplification (OTS) suggested that an additional £14 billion could be raised by making changes to the tax. The recommendations included doubling the rate of Capital Gains Tax to bring it in line with income tax while also reducing exemptions. While such dramatic changes to the tax system are unlikely to happen immediately, the government will be considering how they can generate more from Capital Gains Tax. Smaller changes to the system may be more likely. Increasing Capital Gains Tax, perhaps to a flat rate of 28%, has been discussed for a long time and the current situation may provide the impetus for the government to act.
How Could It Affect Your Business Sale?
Changes to Capital Gains Tax could have big implications if you are planning to sell your business. The amount you pay on capital gains is currently determined by your income, with only those earning over £50,000 a year paying the highest rate of 20%. In addition there is Entrepreneurs relief – reducing capital gains to 10% of the 1st £1m of gains on a business sale. Until March 2020 this relief was up to the first £10m, so the Government have indicated they are not afraid to change this tax.
Overall Capital gains rates are lower than for income tax because gains are often accumulated over a long period. If you’ve spent years building up your business before selling, it doesn’t make sense to tax you at the same rate as the income that you generate every year. The effects of increasing Capital Gains Tax would be particularly hard for small business owners (i.e. abolishing Entrepreneurs relief) as it could dramatically cut the cash retained when selling up – often a vital component of their pension.
Is Now the Right Time to Sell Your Business?
The risk of an increase in Capital Gains Tax could mean that it is better to sell your business now rather than to wait until the rates rise. However, it is unclear when or if the Government will increase Capital Gains Tax, so this shouldn’t be the only factor you consider, especially if you weren’t planning to sell for at least a few years – the tax tail should not wag the commercial dog. Indeed, it could be better to wait and risk paying more in taxes if you increase the value of your business over the next few years, as long as the value growth outweighs any increase in taxes.
It is also worth considering what you will be doing with the proceeds. An increase in Capital Gains Taxes could also affect any investments you’re planning to make in the future, as you will pay tax on the profits you make from these too.
In conclusion, whilst an increase in Capital Gains Tax could be on the cards, which could mean selling your business now rather than later is better, it’s important to look at the bigger picture of what your business could be worth in the future.
Fortunately, you are not alone. At Business Partnership we can help you understand the current value of your business and what it could be worth in a few years, to help you judge this vital decision.
You can either take one of our Value Builder Scores or speak to your local partner – just enter your postcode here and we will do the rest?
Business Partnership have welcomed Simon Fraser as their regional partner for Perth, Highlands and Islands.
An experienced business broker, Simon joins the franchise to build on his previous role selling businesses. Born and bred in Inverness, he has extensive local market knowledge, including many years’ experience in commercial lending and finance.
“I bring to my clients the benefit of having worked with them as their bank manager and seeing first-hand the challenges and opportunities that small businesses in the north of Scotland face,” said Simon.
“I’ve always had an ambition to run my own business and provide an independent future for me and my young family. However, like so many people, I lost my job during the pandemic. The timing seemed to be pushing me to find something for myself and then it was a matter of finding the right opportunity.”
A conversation with Business Partnership started when a close family member sold their business with the help of the Glasgow office and Mr Fraser was impressed with the service and support they received throughout the process.
“The Business Partnership team have a lot of experience and I’m looking forward to getting started. The successful exit of any business needs careful planning and preparation. If owners feel like this might be the right time to sell their business but are unsure where to start, I’d be delighted to hear from them,” he said.
Raymond Blin, Business Partnership’s partner in Glasgow, added: “When I met Simon I knew he was the ideal person to join us and I’m sure he’ll provide an excellent service to his customers.”
Whether you’re selling, buying, or planning for the future, Business Partnership is here to help. Contact us today to speak with your local Regional Partner and start your journey toward success.