The recent Budget introduced some of the most significant changes to capital gains tax (CGT), inheritance tax (IHT), and succession-related reliefs we’ve seen in years. Now that the dust has settled, this article outlines what these updates mean for founders, owner-managers and established SMEs — particularly those considering exit, succession or value extraction in the next 12–24 months.
Blog
December 11, 2025
3 mins
The recent Budget introduced some of the most significant changes to capital gains tax (CGT), inheritance tax (IHT), and succession-related reliefs we’ve seen in years. Now that the dust has settled, this article outlines what these updates mean for founders, owner-managers and established SMEs, particularly those considering exit, succession or value extraction in the next 12–24 months.
These changes don’t need to derail your plans, but they do make proactive, structured planning far more important.
EOT (Employee Ownership Trust) Relief Cut from 100% to 50%
Historically, selling into an Employee Ownership Trust has been one of the most tax-efficient succession routes for founders. However, the Budget halves the CGT relief available, from 100% to 50% - with immediate effect.
For business owners who had been exploring an EOT as a way to secure succession or partially realise value, this materially changes the economics. A reassessment of the comparative benefits (vs a trade sale or minority investment) is now essential.
BADR (formerly Entrepreneurs’ Relief) Becomes Less Generous
From April 2026, the CGT rate applicable under Business Asset Disposal Relief will rise to 18%. For founders relying on BADR for a clean, tax-efficient exit, the window to optimise after-tax proceeds has narrowed.
A traditional trade sale, management buy-out, or phased share disposal will now require more careful timing and structuring.
Positive: Expansion of EMI Share Option Schemes
The Budget increases the scope of Enterprise Management Incentives in three ways:
This is welcome news for growth-oriented businesses. Enhanced EMI schemes can strengthen leadership retention, improve alignment, and support enterprise value creation ahead of exit — particularly important in markets where buyers prioritise strong management teams.
Major Changes Coming From 6 April 2026: BPR, APR & IHT
The longer-term tax landscape for business owners also shifts considerably.
A New £1 Million Cap on 100% Relief
Business Property Relief (BPR) and Agricultural Property Relief (APR) will only apply at 100% up to a combined allowance of £1m. Above that, relief drops to 50%.
For founders with businesses valued well above this threshold, this represents a meaningful shift in potential IHT exposure.
Effective IHT Rate Increases to 20% Above the Threshold
Because 50% relief applies on value over £1m, assets above this threshold will effectively face a 20% IHT rate (50% of the standard 40%).
AIM Shares Drop from 100% to 50% Relief
AIM-listed shares, often used in portfolio planning and inherited share strategies, will now only qualify for 50% BPR, regardless of the £1m allowance.
Transferability & Lifetime Gift Rules Updated
These changes collectively reinforce the importance of early planning, particularly for founders whose estates are closely tied to the value of their business.
What This Means for Founders: Value Creation, Timing & Exit Planning
The strategic implications of these reforms are significant.
EOTs Require Re-Evaluation
With the CGT relief halved, many founders considering an EOT may find a trade sale, partial sale, or alternative succession route more attractive. The viability depends on:
Running revised scenarios under the new 50% regime is essential.
Exit Planning Must Focus on Net Proceeds, Not Just Enterprise Value
With CGT increases on the horizon, the real question becomes, 'What do I actually take home?'
Creating a post-tax proceeds model, factoring CGT, structure, consideration mix, earn-out risk and timing, provides clarity and may influence whether early crystallisation is beneficial.
This aligns with the framework our The Conscious Capital Creator™, where personal goals and financial readiness sit at the centre of the exit strategy.
Enhanced EMI Schemes Are a Strategic Lever for Value Creation
The expanded EMI parameters give founders a powerful opportunity to:
Businesses that demonstrate strong governance and a non-founder dependent leadership team consistently achieve higher multiples — often 20–30% uplifts.
IHT Planning Has a Narrower Window
For business owners with companies valued over £1m, delaying action may result in a materially higher estate tax burden. Lifetime gifting, share restructuring, or other estate planning strategies may need to begin sooner than anticipated.
The seven-year clock for gifts falling outside the estate reinforces the importance of starting early.
Regardless of whether you are planning to exit soon or simply want to strengthen enterprise value, consider the following actions:
Reassess any EOT-based exit plans- Run new scenarios under the updated relief rules.
Build a post-tax proceeds model- Your sale price is not the number that matters, your net outcome is.
Use the expanded EMI allowance proactively- Especially if you are scaling, considering investment, or planning succession.
Review your exit timing- Some founders may choose to accelerate key decisions before April 2026.
Start estate and IHT planning early- Particularly if your business represents a large portion of personal wealth.
These Budget changes represent a shift, not a setback. With early, intelligent planning, founders can still:
At Implicit, we specialise in helping owners navigate these decisions using a strategic, structured framework grounded in 20+ years of corporate finance and private equity experience.
If you’d like to understand how these changes might affect your business or your long-term wealth planning, we’re always happy to help.
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Implicit Advisory Limited is a Private Limited Company registered in England and Wales under registered number 13405906 whose registered office address is at Hyde Park House, Co AJ Fleet & County Limited, Hyde, SK14 4EH.
