Higher Capital Gains Tax Hits SMEs—Act Now to Restructure Their Companies

London Business Owners: Why Your Company Structure is About to Get a Tax Shake‑up

Hey entrepreneurs! If you’re planning to sell your London‑based trading company, grab a coffee because tax changes are coming that could double the bulk of your gain. The Capital Gains Tax (CGT) rate on trading company shares is climbing – and so is the rate for the Business Asset Disposal Relief (BADR) from next April.

What’s Going on?

CGT on shares jumps from 10 % to 14 % on 5 April 2025.
The main CGT rate rises from 30 % to 24 % as of 30 October 2024.
From next April, BADR’s tax rate climbs to 18 %.
That means if you’d pocket £2 million, the tax you’ll pay could have more than doubled in the last decade.

Who’s Feeling the Pinch?

Owners planning a sale within the next 1–5 years.
Shareholders with holdings worth > £1 million.
Those hoping to share the sale proceeds with family.

Make Sense of Your Structure Before It’s Too Late

Long ago, entrepreneurs could enjoy a sweet 10 % CGT rate on qualifying assets under the Entrepreneurs’ Relief scheme. The policy has been tightened, renamed BADR, and the lifetime allowance trimmed from £10 million to £1 million. That shift suggests it’s time to re‑evaluate how your company is set up.

Here are a few practical moves you can consider:

Hold your trading company under a holding company. This gives you flexibility on whether to sell the holding entity or its subsidiaries.
Allocate shares. Give up to 5 % of your shares to a spouse or other family member to spread the tax load.
Explore inheritance tax (IHT) and commercial benefits – they might provide additional reliefs beyond the immediate sales tax.

Bottom Line

Capital gains and BADR rates are getting steeper, and the window to act wisely on your sale is narrowing. Don’t wait until April – that’s just a calendar date, not a reason to procrastinate. Get expert guidance now, figure out how your company’s structure fits the new tax landscape, and you could very well save a tidy chunk of the tax you’ll have to pay.