New tax year pushes business sale tax higher again – are entrepreneurs being squeezed?

Changes such as the increase from 14% to 18% could mean some business owners having to work an extra year just to stand still. When you add this to the earlier move away from 10%, the cumulative impact becomes much more significant.

On a £1 million sale, the shift from 10% to 18% equates to an extra £80,000 in tax. In practical terms, that’s the equivalent of around two additional years of work for many—simply to end up in the same position.

And while £1 million may sound like a large number, in today’s terms it often represents a lifetime’s work rather than extraordinary wealth. These changes risk pushing back retirement plans rather than just trimming excess.

BADR has now increased by 80% over the past decade and by a further 28% in this latest change alone — this is not a one-off adjustment, it's an ever-increasing tax on entrepreneurial success.

And this doesn't exist in isolation. Employer NI increases and minimum wage rises — which ripple upward through salary structures, not just the lowest tier — are already squeezing owners before they even think about exit. SMEs represent 99.9% of all UK businesses. They are the backbone of this economy and the starting point of every large company. If we're wondering why there are so few homegrown UK success stories, this is part of the answer — the risks of starting and growing a business keep rising while the rewards keep shrinking.

Owners who can exit sooner may now do so. Others will look harder at restructuring. EOTs, once a compelling 0% route, have lost much of their appeal. But the deeper concern isn't those planning their exit — it's the people watching all this who decide never to start

On paper a 4% increase may not look drastic, but in real terms for every £1m of sale proceeds it is an extra £40k going to HMRC, which is meaningful. The impact of this is the same as fiscal drag in that reliefs are becoming less generous over time, rates are creeping up and lifetime limits have shrunk dramatically.
Changes in tax impacts like these will influence business owners thinking about timing, succession planning, structure and much more. EOTs are less tax favourable, but they still offer a good route, especially where an owner wants to look at longevity of the business, while extracting value and sharing future wealth creation with their valued team members.

The starting point for conversations I have with business owners looking to sell is what are you looking to achieve, what do you want life to look like after business and how much do you need to achieve this. Robust cash flow planning underpins effective exit planning conversations.