The 2025 Budget introduced a series of tax and investment reforms that will influence how small business owners plan for growth, succession and exit. While every deal still depends on the specific strengths and risks of an individual company, these changes will shape valuations, buyer priorities and the after-tax return you receive from a transaction.
Early planning remains essential. If you are considering a business sale, acquisition or investment, seeking advice at the earliest stage can help you understand the impact on your own situation.
1. Growth opportunities
Businesses with strong growth trajectories continue to attract higher valuations, so owners should make the most of measures that support expansion.
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The Government is prioritising innovation, offering additional support for sectors highlighted in the Industrial Strategy (the “IS-8”) and directing further investment to specific regions.
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Management teams who monitor these initiatives closely – and build relationships with the relevant bodies – will be best placed to secure grants, incentives or support as they become available.
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For high-growth and scale-up businesses, the increased investment limits for EIS and VCT schemes may improve investor appetite. This can strengthen funding options and ultimately boost company valuations.
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Additional fiscal support may also be available in areas such as capital expenditure, research and development and digital transformation. Speaking to an adviser can help identify opportunities relevant to your business.
2. Employee involvement in your business
The Budget introduced changes to employee incentive schemes which may influence ownership and exit planning.
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Updates to the eligibility rules for Enterprise Management Incentive (EMI) schemes – including increased employee limits and values – may help retain key management before or after a transaction. This strengthens buyer confidence and can support higher valuations.
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These schemes also offer more flexibility if you are considering a management buyout as a potential exit route.
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However, the reduction of capital gains tax relief for the Employee Ownership Trust (EOT) route, from 100% relief to 50% relief, may make this option less attractive for some sellers.
3. Inheritance Tax planning remains a priority
Changes to Business Property Relief (BPR) and Agricultural Property Relief (APR), announced in the previous Budget, will take effect from 6 April 2026 and remain an important consideration.
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For business ownership valued above £1m, a 20% inheritance tax liability may apply when those assets pass to beneficiaries.
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Each business owner retains 100% relief on the first £1m of value, and the 2025 Budget confirmed that this allowance can transfer to a surviving spouse – giving up to £2m of relief on second death.
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Any value above this will be subject to an HMRC valuation and potentially significant inheritance tax.
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There are several planning measures that can help mitigate this cost, so discussing your personal position early is strongly recommended.
Final Thoughts
The 2025 Budget presents both challenges and opportunities for business owners considering a sale, acquisition or long-term succession plan. Understanding how the changes affect your growth strategy, tax position and market valuation is crucial.
If you are exploring business growth, funding, succession or exit, please contact our team for tailored advice on your plans and timetable.
For tailored advice on growth, funding, succession or exit planning, contact Sarah Hartshorn.
