CORPORATE lawyers and business experts have said punitive new taxation on companies in the event of a sale is “a continual tax-grabbing assault on SMEs” and that some business owners will have to “work an extra year just to stand still”.
One warned that “if we’re wondering why there are so few homegrown UK success stories, this is part of the answer”.
Since the start of the new tax year, business owners face a further increase in the tax cost of selling their business and cashing in on their hard work.
Business Asset Disposal Relief (BADR), formerly Entrepreneurs’ Relief, has risen from 14% in 2025/26 to 18% from 6 April 2026 on the first £1m of qualifying gains. This continues a wider shift from the historic position of 10% on up to £10m, increasing the overall tax burden on entrepreneurs over time.
Tax on success
Martin Rayner, Director at Compton Financial Services, said: “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.”
Scott Gallacher, Director at Leicester-based Rowley Turton, a financial advisory firm, said: “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.”
And for what?
Steven Mather, Lawyer & Director at Leicester-based Steven Mather Solicitor, said the changes make a significant difference on sales above £1m.
He continued: “Three years ago, a sale at £5m would have cost £900,000 in tax. Now, the same sale costs £1.14m – almost an extra quarter of a million in tax. And for what? Nothing.
“A business owner who has worked really hard over the years, paying all the tax along the way, to get to the point of exiting and having to pay another shedload to the Government.
“When I first started, BADR was called “Entrepreneurs’ Relief” and was £10m at 10%. That helped incentivise British entrepreneurs to build and grow in the UK. Now? Those people go and do it in the UAE where it’s all tax-free.”
Graham Nicoll, Financial Planner at NCL Wealth Partners, added: “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.
“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.”
Why run a business in the UK?
Colette Mason, Author & AI Consultant at London-based Clever Clogs AI, said the Government’s messages are mixed at best: “Just last week, the government launched the £500m Sovereign AI fund telling AI entrepreneurs to start, scale and stay in Britain. But why would you, if the exit is being taxed so punitively?
“You can’t pour public money into helping founders build and then squeeze what they keep after years of grafting to make it work.
“At some point, people do the maths and build somewhere that lets them keep the reward, and that really isn’t Britain with the continual tax-grabbing assault on SMEs.”
