North West company owners caught out by Capital Gains Tax

North West business owners are being warned that leaving Capital Gains Tax (CGT) planning too late is costing them substantial tax savings; in some cases, missing out on Business Asset Disposal Relief (BADR) entirely.

Corporate tax advisory specialist Sophie Huddleston, Partner at UK top 10 accountancy firm and business advisory group Azets, says her team is increasingly seeing local cases where minor adjustments made two years earlier could have secured significant reliefs.

In one recent case, a family business based in Greater Manchester approached Azets just before a sale, only to discover that none of the family shareholders qualified for BADR. Had they reviewed their shareholding structure two years earlier, minor changes could have reduced their tax liability considerably. While Azets couldn’t reinstate BADR at that stage, the team implemented family share transfers ahead of the sale to achieve other long-term objectives and reduce future inheritance tax (IHT) exposure.

Another current North West example involves a trading group based that initially planned for its holding company to sell its trading subsidiaries to qualify for the substantial shareholding exemption (SSE), meaning no corporation tax would be due on the gain and the proceeds could be reinvested. Azets is now working with the sellers and the wealth management team to design a pre-sale, tax-efficient structure that both maximises BADR availability and safeguards against future IHT, while still meeting the shareholders’ commercial objectives.

Sophie warns that the window for effective planning is narrowing:

“Business owners should be reviewing their shareholding structure at least two to five years ahead of a sale to ensure it works for them and maximises the availability of BADR. The conditions for BADR must be met for a two-year holding period, so early action is essential.”

The warning comes as CGT rates on shares in trading companies have increased, with further rises for BADR set for next April.

Entrepreneurs’ Relief (ER), introduced in 2008/09 as an incentive for UK business creation, originally reduced CGT to 10% on qualifying disposals, compared to the standard 18% or higher rate of 28%. In 2020, ER was renamed BADR, the conditions were tightened, and the lifetime allowance was reduced from £10m to £1m.

Sophie explained:

“For many years, there was a 10% effective rate of CGT that owner-managers could benefit from on sale or retirement, but this ended on 5 April 2025, when the rate increased to 14%, with the main rate of CGT having increased to 24% from 30 October 2024. However, from next April, the rate of tax where BADR applies will be 18%. In less than 10 years, the CGT payable on £2m of qualifying gains has more than doubled.”

Those most likely to benefit from early advice include shareholders of trading companies who are likely to sell within the next 1–5 years, people with shareholdings worth more than £1m, or more than they want to spend in their lifetime and people who have family members they may want to benefit from the sale proceeds.

Sophie concluded:

“Business Asset Disposal Relief has influenced how company ownership is structured. People with valuable companies need to determine whether their structure still works for them in light of these changes – especially if their shareholdings are worth more than £1m and more than they would want or need to spend. There are options, such as introducing a holding company, which can give flexibility on whether to sell the holding company or trading subsidiaries. Alongside reducing the tax payable on a sale, early planning can also deliver inheritance tax and wider commercial benefits, but securing expert advice well before a sale is on the horizon is essential.”

Azets is an international business advisory group with regional offices in Burnley, Bolton, Lancaster, Manchester, Preston, Shrewsbury, St Asaph and Stockport.