Don't be rushed into exit plans

Shropshire companies should not be rushed into selling their businesses prematurely, despite the Government’s plans to make changes to disposal rules.

That’s the warning from Sarah Hartshorn, from Dyke Yaxley Chartered Accountants in Shrewsbury, who said she was expecting a raft of conversations with clients considering a swift sale.

“The Government has announced it intends to increase the rate for Business Asset Disposal Relief from April 6, 2025. This means the lifetime limit for BADR will remain at £1 million, but the rate of tax will increase from 10% to 14%, and it will increase again to match the lower main rate at 18% from April 5, 2026.”

Sarah said a careful and managed planning strategy was crucial for any business owner considering their exit.

“The UK’s changing Capital Gains Tax regime has had a profound effect on business owners over the years, influencing their decisions on investing, holding, or selling assets. While lower CGT rates and reliefs have traditionally encouraged entrepreneurship, recent reductions in reliefs have also led other business owners towards alternative exit strategies.”

Introduced by a Labour Government in 1970s, there have been ten changes to those Capital Gains Tax rates and reliefs which specifically affect business owners, by various Governments, until 2024 – this equates to one major impact every five years.

“If you are considering taking urgent action to change the ownership of your company, we would always advise that the ‘tax tail’ should not wag the dog!” said Sarah.

“Embarking on a business sale is not a decision to be taken likely.  It involves many steps and a hasty transaction can lead to financial, legal, and operational risks which are taken unnecessarily.”

Here are Sarah’s key reasons to take your time:

• Maximising the valuation – a rushed sale may prevent you from achieving your best price and deal structure.
• Finding the right buyer – the right buyer may take time to find but can ensure smoother transition and better long-term outcomes.
• Stronger negotiating power – a rushed sale often puts the seller in a weaker position, as buyers may sense urgency and push for lower prices or more favourable terms.
• Due Diligence preparation – buyers will conduct thorough due diligence after their initial offer and before commencing the legal process.
• Legal contracts – asking a lawyer to rush through a legal process may mean that contractual terms, warranties, indemnities or disclosure is not through and discussed thoroughly.
• Tax and financial planning – whatever the tax regime is in place at the time, tax planning is not something to be rushed.
• Market conditions – sectors often go through cycles where there is consolidation and more purchasers looking to acquire, and then quieter periods. Understanding that cycle for your sector, along with the wider economic market, is key.
• Emotional readiness – selling a business is a life-changing decision. Rushing can cause emotional stress, especially if you are not fully prepared.

Sarah said: “It’s important to avoid post-sale regret by being ready to sell your business at the right time for you and the company, not because a Chancellor’s announcement has rushed you there prematurely. 

“As a member of The Corporate Finance Network, Dyke Yaxley has access to some of the best available exit planning processes for owner-managed businesses.

“After two to three years of exit planning to build the valuation of your company, the post-tax proceeds should mitigate the impact of the fiscal policy changes we’ve seen during this first Budget from a new Government. And you will have achieved a much more successful (and calmer) exit.”