“Make landlords pay their fair share”. While this is the political sell of a Capital Gains Tax rise, it’s British businesses that pay the price.
Tax uncertainty continues to plague UK businesses. While the Government’s decision to leave headline Capital Gains Tax rates unchanged in the Autumn Budget offers some reassurance, other tax changes have added to the pressures facing entrepreneurs.
Alexander Ogden, Director at Executive Life, argues that although CGT increases are often presented as a way to make wealthy landlords and investors pay their fair share, it’s British business owners who risk bearing the burden. Further increases could become the tipping point for entrepreneurs already questioning whether the UK remains an attractive place to build and sell a business. Here’s why.
Who is Targeted More by CGT: Business Owners or Property Owners?
Entrepreneurs selling a business account for half of CGT revenue in the UK. Property, however, is incorrectly the asset most invoked in this debate. In 2023-24, residential property produced £9.4 billion of gains and £2.2 billion of Capital Gains Tax, against a total CGT take that year of £65.9 billion in gains and £12.1 billion in liability. Property accounts for roughly 18% of what CGT actually raises. The other 82% comes from financial assets: shares, funds, and stakes in businesses.
And within that 82%, it isn’t the stock market either, at least not in the way people picture it. HMRC’s asset-level data shows financial assets made up 77% of all gains in a typical year, but unlisted shares, for example, stakes in private companies and anything not traded on the London Stock Exchange, generated 67% of that financial-asset total, against 33% for listed shares.
Run the two ratios together and roughly half of all Capital Gains Tax gains in Britain come from people selling private company stock. The underlying story becomes hard to miss: the single largest source of CGT is entrepreneurs and business owners cashing out, not portfolio investors and not landlords.
What impact do the Changes to Business Asset Disposal Relief have on SMEs?
The concentration at the top reinforces this rather than complicating it. 40% of all CGT comes from the fewer than 1% of taxpayers making gains of £5 million or more in a year. Nearly half of all gains belong to people whose taxable income already sits in the 45% additional-rate band. That is a genuinely small, genuinely wealthy population, but the activity generating their gains is disproportionately a business sale, often the only major liquidity event of their working life, not a rolling portfolio of trades.
Business Asset Disposal Relief exists precisely because policymakers have long accepted that this group is a different case from a portfolio investor. It’s also a relief that has been quietly getting less generous, with further restrictions announced at the Autumn Budget.
Before October 2024, BADR gave qualifying business sales a rate of 10% against a standard higher rate of 20%, a 10-point discount. This has been reduced gradually, quietly. Now, the relief available has been reduced further, with the Budget putting into force that lifetime limit on qualifying gains falling from £1 million to £500,000 from April 2027. For a business owner making a £1 million qualifying gain, this means a potential CGT bill of £210,000, compared with £100,000 before April 2025.
Should CGT Align with Income Tax?
That makes the proposal to align CGT with Income Tax worth testing against what comparable countries actually charge, rather than an abstract idea of fairness. That would matter less if the UK’s current rate were already out of step with the rest of Europe. It isn’t. At 24%, the rate that applies once someone selling a company has used up the available Business Asset Disposal Relief (BADR), limited to £500,000 of qualifying lifetime gains from April 2027, the UK’s higher CGT rate remains below the standard rates charged in several major European economies.
Ireland’s standard CGT rate is 33%, France’s is 31.4%, the Netherlands taxes entrepreneurs with a “substantial interest” at up to 31% and Germany’s effective rate on a comparable disposal is around 26 – 28%. Switzerland does not tax private individuals’ capital gains on shares at all. All sit below the 40% rate that aligning UK CGT with the higher Income Tax rate would create. The UK would not be catching up with its peers; it would be overtaking them to become the most expensive country in this group in which to sell a business you built, just as its own relief for doing so has already been quietly halved in value.
How Does Tax Uncertainty Affect Business Owners?
The Autumn Budget has provided some reassurance by leaving headline CGT rates unchanged. However, the changes to BADR demonstrate how the tax burden on entrepreneurs continues to grow, leaving business owners wondering whether further changes could affect the timing of a sale, investment decision or business exit.
That uncertainty can have a real economic effect even when the threatened tax change never materialises. People become reactive rather than strategic: entrepreneurs may bring forward disposals, investors may delay commitments and individuals may restructure their finances based on what they think the Government might do next. For business owners in particular, constantly shifting expectations around CGT make long-term planning harder. A genuinely pro-business tax environment is not simply about the headline rate; it is also about stability and predictability. Businesses can plan around a tax they understand, but it is much harder to plan around the possibility that the rules could change at every Budget.
Of course, none of this means the case for reforming CGT is baseless, or that every high earner realising a large gain deserves sympathy. But the debate keeps being conducted as though the money sits with landlords and passive wealth. However, the fact remains that it overwhelmingly sits with the small number of people each year who start a company, build it for years, and eventually sell it. This group represents one that has found it measurably harder to be rewarded in the UK since 2024, and one that a further rate rise could price out of the UK more decisively than any of its major European neighbours price out theirs.
Conclusion
While tax uncertainty is a persistent certainty in today’s climate, small businesses need to look to themselves for a shield. By assessing their portfolio, investing in business protection and uncovering the hidden tax efficiencies and savings that can be found by taking a more strategic view, business owners can ensure they are in the strongest position possible, no matter what the next tax storm unveils.
About the Author
Alexander Ogden is a qualified financial services professional and Director at Executive Life, with a business portfolio spanning healthcare, financial services and venture capital. He advises UK SME owners on financial and protection strategies, specialising in the challenges facing company directors. As a business owner himself, Alexander combines professional expertise with first-hand entrepreneurial experience.
