Blog Post:
The recent UK Budget introduced some heavy changes for business owners that could reshape the financial landscape. On Wednesday, the Chancellor confirmed significant adjustments to Capital Gains Tax (CGT), Inheritance Tax (IHT), and National Insurance Contributions (NIC). Business owners across the UK are now wrestling with the reality of rising costs and future uncertainties, sparking questions about what these changes mean for their ventures, growth strategies, and even their decision to remain in the UK. Here’s an in-depth look at these changes and how they could affect you as a business owner.
Capital Gains Tax (CGT) Increase – What Does It Mean for You?
From today, CGT rates are climbing from 10% to 18% for the lower rate and from 20% to 24% for the higher rate. While these hikes aren’t as severe as some anticipated, they’re a big deal for entrepreneurs and investors alike.
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Why this matters: CGT traditionally offers lower rates than income tax to encourage entrepreneurship. Higher CGT now means reduced incentives for those looking to start and scale businesses in the UK.
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The bigger picture: With CGT increases, nearly half (46%) of surveyed UK business owners stated they’d reconsider starting a new business under higher tax burdens. And almost 48% reported they’d consider moving their operations overseas if taxes became overly restrictive. This could hinder economic growth and job creation, especially in regions heavily dependent on small and medium enterprises.
If you’re a business owner in the UK, these changes are prompting real questions. Is it still worth the risk to invest in growth, or should you look into diversifying overseas to safeguard your investments?
Inheritance Tax (IHT) Adjustments – The Struggle for Family-Owned Firms
Starting in April 2026, Agricultural Property Relief and Business Property Relief on IHT will face new restrictions. Assets valued over £1 million will now only receive 50% relief, and AIM shares will lose their tax-free threshold status altogether.
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Impact on family businesses: These IHT changes will make it harder—and more expensive—to pass family-owned businesses down to the next generation. In certain cases, especially for longstanding family firms, the IHT bill could be the tipping point that forces a sale, impacting both the business and its local community.
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What does this mean for agricultural firms? Agricultural businesses are particularly vulnerable. With ongoing uncertainties post-Brexit and reduced subsidies, farming has become an already challenging industry in the UK. With IHT reforms, agricultural firms may face tough decisions regarding their futures. Originally introduced in 1984, Agricultural Property Relief was designed to help safeguard land from crippling IHT bills. Now, with its scope reduced, farming businesses must prepare for an uncertain future.
Passing down a business is often a matter of legacy and community, and these IHT adjustments could force some to rethink their succession planning and long-term strategies.
National Insurance Contributions (NIC) and Minimum Wage Increase
Employers’ National Insurance Contributions (NIC) are set to rise by 1.2%, pushing rates up to 15% by April 2025. The threshold for contributions will also be lowered, now starting at £5,000. Combined with a National Living Wage bump to £12.21 from April, business owners face rising employment costs.
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Challenges for hiring: This rise in NIC costs makes employing staff more expensive, which could deter job creation and slow economic growth. According to Toby Tallon, a tax partner at Evelyn Partners, this change could make business owners hesitant to hire, putting expansion plans on hold.
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Implications for job creation: The increased NIC is particularly impactful for small businesses and startups. As these employers wrestle with tighter profit margins, they’ll likely face difficult decisions about whether or not they can afford to keep their current staff or hire new workers.
Businesses at a Crossroads – What’s the Long-Term Impact?
These tax changes come amid a backdrop of concern. According to a survey by Evelyn Partners, 50% of business owners are considering relocating if these trends continue. Tax professionals are seeing this trend firsthand—some clients have already made plans to move their businesses to more tax-friendly countries. And it’s not just businesses; potential investors are keeping an eye on the UK’s evolving tax landscape, with some considering a wait-and-see approach before investing.
Questions on the minds of business owners:
- Can I still afford to grow my business in the UK? With higher CGT and NIC rates, many are questioning whether their growth goals are feasible under these new conditions.
- Should I explore overseas options? Business owners, especially those with international networks, might find it appealing to relocate to more tax-friendly environments.
Practical Steps for Business Owners to Navigate These Changes
Navigating the shifting tax landscape may feel daunting, but there are proactive measures you can take.
- Consult a tax expert: A trusted tax advisor can help identify strategies tailored to your business.
- Explore overseas opportunities: Whether through subsidiaries or expanding into new markets, diversifying may offer a safeguard against the UK’s rising tax landscape.
- Evaluate your succession plan: If your business is family-owned, assess how the IHT changes will impact your legacy and consider making adjustments to ensure a smooth transition.
- Adapt your hiring plan: Rising NIC costs may require a rethink of staffing levels. Explore options like outsourcing or part-time roles to manage costs effectively.
The UK’s business environment is undergoing rapid changes that could significantly impact business owners and investors alike. With rising CGT, IHT, and NIC rates, companies across the country face an uphill battle to balance their growth ambitions with their tax liabilities. While these changes may compel some to look beyond the UK, it’s also an opportunity to adapt and prepare.
Learn More:
- Capital Gains Tax (gov.uk/cgt)
- Inheritance Tax (gov.uk/inheritance-tax)
- National Insurance Contributions (gov.uk/national-insurance)
- UK economic growth (ons.gov.uk/economy)
- Agricultural Property Relief (gov.uk/agricultural-property-relief)
