Today’s Budget has some eye-catching measures for entrepreneurs and growing businesses, but established businesses contemplating an exit may have less to celebrate.
The headline announcement is a new Founders’ Relief, offering a 10% capital gains tax rate on lifetime gains of up to £10 million for qualifying founders.
Alongside further expansion of Enterprise Management Incentives through EMI2, including an increased individual option limit, the measures suggest the government has recognised the importance of helping entrepreneurial businesses attract and retain talent as they grow.
There is also some welcome support for smaller businesses.
The threshold for 100% Small Business Rate Relief for qualifying retail, hospitality and leisure premises will increase from £12,000 to £18,000, taking an estimated 70,000 businesses out of business rates altogether.
There will also be transitional rates support and an expansion of the British Business Bank’s Growth Guarantee Scheme.
However, that sits uncomfortably alongside the decision to reduce the lifetime limit for Business Asset Disposal Relief (BADR) from £1 million to £500,000 from April 2027.
For many existing owner-managed businesses, that could materially increase the tax cost of a future sale.
The contrast is interesting. A new relief worth potentially £10 million of gains for qualifying founders is being introduced at the same time as BADR is being restricted for existing business owners.
That strongly suggests Founders’ Relief will be a targeted incentive for a narrower category of high-growth businesses, rather than anything resembling a return to the old Entrepreneurs’ Relief.
The detail, particularly the qualification criteria, will be crucial.
Overall, there are some positive measures here for small and growing businesses, particularly around business rates and employee incentives.
But for established owner-managed businesses thinking about succession or exit, the Budget appears to give with one hand and take with the other.
Overall, Kemi Badenoch’s response that this is a budget for “getting by rather than getting on” could be well pitched.
