My HGH
My HGH
Are you prepared for the upcoming tax changes?
This April brings a series of important tax changes in the UK that business owners should be aware of. These updates are likely to have a direct effect on your cash flow and may influence your company’s future growth or exit plans. Our corporate finance team have summarised the potential impact of each.
Capital Gains Tax
- CGT rates rise from 14% to 18% from 6 April 2026
- Maximum Business Asset Disposal Relief benefit drops to £60,000 per individual (from £100,000)
Action: It is now too late to complete a sale before the changes take effect. Instead, focus on exit planning measures. These strategies can boost your company’s profitability and valuation. They also make your business more appealing to buyers. As a result, you may reduce the impact of the higher tax charge.
Inheritance Tax
- Business Property Relief capped at £2.5 million per individual
- Assets above threshold attract only 50% relief (effective 20% IHT)
Impact: Family succession planning and ownership structures need review so that you have a plan for your beneficiaries to be able to pay the IHT.
Equity Fundraising
- EIS/VCT annual limits rise to £10 million; lifetime limits to £24 million
- VCT income tax relief falls from 30% to 20%
Opportunity: consider private equity as a route for financing your business as they have significant funds to invest. More sectors are also now consolidating with PE acquiring larger ‘platform’ businesses and rolling-up smaller companies.
FRS 102 Accounting Changes
Operating leases are now recognised on balance sheets as right-of-use assets. Here are three things you should consider due to these accounting changes:
- Impact on valuations: EBITDA, net debt and gearing ratios materially affected
- Funding covenants risk: May trigger breaches – engage lenders early
- Due diligence: Buyers will scrutinise restated financials; profit multiples may require adjustment
Wage and Cost Pressures
- National Living Wage rises to £12.71/hour (+4.1%); 18–20 rate up 8.5%
- Higher commercial business rates add further margin pressure
Impact: Earnings-based valuations and debt affordability assessments may be affected. Ensure costs are managed efficiently and credit control measures are robust to avoid bad debts.
Employment Rights Act 2025
- Unfair dismissal protection from six months’ service (down from two years)
- Compensation cap being removed
- New rights on guaranteed hours, flexible working and harassment prevention
Due diligence focus: Buyers will expect robust HR systems and documentation
Income extraction
- Dividend tax rates rise by 2% for basic and higher-rate taxpayers
- Income tax personal allowance thresholds have not risen in line with inflation since 2021 and this ‘fiscal drag’ can cause cliff-edges where taxes suddenly increase.
Planning measures: re-consider your general income extraction but also consider what will happen when you sell the business and how you will remove any assets from the transaction
Need Help? Get in Touch!
These changes will require proactive planning to maximise the opportunities and reduce the risks.
Call us on 01904 655202 or contact us through enquiries@hghyork.co.uk
