Entrepreneurs accelerate exit planning as Capital Gains Tax fears grow

News | by Stephen Kiggins
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As the Labour government prepares its first budget [to be announced 30 October] business owners are expediting their exit planning in anticipation of significant Capital Gains Tax increases.


UK entrepreneurs are bracing for potential changes to Capital Gains Tax (CGT) which could see the top rate more than double, from 20% to 45%.

In the face of losing a significant portion of the value they have built over years (or even decades) these business owners are now accelerating their exit planning.

The CEO of ‘Helm’, a member group for founders of rapidly growing companies, Andreas Adamides, describes the current sentiment amongst its members as unprecedented.


"We have never seen anything like this.

There are members who are in the process of a [business] sale
who have told buyers they will be pulling out if the sale doesn’t
go ahead before the Budget, and that they won’t sell if CGT goes up.”

Andreas Adamides [CEO of Helm] - Financial Times, 2 October 2024


They are unwilling to see this tax on their life's work dramatically erode the wealth that they had planned to rely on in retirement and pass on to their children, and a survey of its members indicated that six out of ten would consider leaving the UK to avoid a CGT hike​.


Labour's Rhetoric Pushes Business Owners to Look Abroad

Dominic Ponniah, co-founder of Cleanology, a company founded in 1999 which now employs more than a thousand staff, expressed deep concerns over the Labour government’s tax strategy, “Labour’s rhetoric and actions so far make businesses feel unwelcome, which is the opposite of what they should be doing. Without question, I will be starting my next business outside the UK.”

Likewise, Benjamin Ludzker, CEO of family business, Kays Medical, expressed frustration that a CGT hike could strip nearly half the value of the company that he had worked so hard to build up.

"Increasing CGT to 40-45 per cent would take nearly
half
the value built over decades.
If these changes happen, I’d consider leaving the UK.”

Benjamin Ludzker [CEO of Kays Medical] - Financial Times, 2 October 2024


By relocating abroad, UK business owners can avoid the punitive CGT that would be levied on the sale of their business, in order to realise and protect the return from their [long term] investment in it.

For business owners like these, relocating to a significantly more tax-friendly jurisdiction such as Dubai, Portugal, Switzerland and the US are proving to be the most popular choices for high net worth individuals relocating from the UK to protect their wealth.

This looming CGT hike presents a crucial tipping point for many UK entrepreneurs, with the government's plans acting as a catalyst in driving out some of the country’s most successful business owners - leading to a potential exodus that could significantly impact the very ‘growth’ that Kier Starmer and Rachel Reeves have cited as their strategic goal for the UK economy.

How could it impact you?

A worked example

How much CGT you pay depends on your income tax band. Top rate taxpayers currently pay 20% CGT on profits made above their CGT annual allowance of £3,000.

Currently, if you were to sell your business and generate a profit of £3 million from that sale, ‘Business Asset Disposal Relief’ [previously called ‘Entrepreneur’s Relief’] would reduce the CGT payable on the first £1m to 10%, and the balance would be taxed at 20% [less your CGT annual allowance of £3,000].

The CGT you would currently pay on the sale of your business realising a £3m profit would therefore be £499,400.

If Labour increases CGT in line with Income Tax rates, as a top rate taxpayer you will pay CGT of £998,650 instead of £499,400 on the sale of the business.

Speak with us to explore your options

As the Budget draws closer, now is the time to explore your options.

As international financial planners and wealth managers we can provide you with expert advice on protecting your wealth and securing your financial future, so if you are thinking about your business exit or re-locating away from the UK and would like to schedule an initial consultation contact us today or email us at [email protected].


This communication is for information purposes only and does not constitute financial, legal, or tax advice. Please schedule a meeting to receive advice on international financial planning and wealth management.

Current Capital Gains Tax Rates & Annual Allowance

Individuals [including self-employed sole traders, partners in business partnerships, and company owners] are given an annual CGT allowance of £3,000 [down from £6,000 in the 2023/24 tax year and £12,300 in the 2022/23 tax year].

CGT is payable on any profits in excess of the CGT Annual Allowance, from the sale of assets in that tax year. The allowance resets annually on April 6 when the new tax year begins.

  • 18% on residential property
  • 10% on gains from other chargeable assets

CGT is payable on any profits in excess of the CGT Annual Allowance, from the sale of assets in that tax year. The allowance resets annually on April 6 when the new tax year begins.

  • 24% on residential property gains
  • 20% on gains from other chargeable assets
  • 28% on gains from "carried interest" if you manage an investment fund

[There are different allowances for trustees and those with non-domiciled status]

Business Asset Disposal Relief (previously called 'Entrepreneurs’ Relief' - updated in the Finance Act 2020) reduces the rate of Capital Gains Tax (CGT) on disposals of businesses or business assets from 20% to 10%.

There is a cumulative lifetime limit for qualifying gains of £1 million for disposals on or after 11 March 2020. This is reduced from the previous limit of £10 million for Entrepreneur's Relief purposes.

A claim for Business Asset Disposal Relief must be made on or before the first anniversary of the 31 January following the tax year in which the disposal is made.

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