The 2025 Budget introduced several tax and investment reforms that will influence how small business owners plan for growth, funding, succession and exit.

While deal appetite is still driven by the core strengths and risks of any individual company, these policy updates will shape valuations, buyer priorities and the after-tax returns on a transaction.

Obtaining advice according to your own personal and business situation remains key, so please speak to us early in your thought process.

1. Growth opportunities

• Growing businesses always provide greater opportunities when they are being acquired and also higher valuations if they are being sold. So all business owners should take full advantage of measures to support growth.
• This Government is prioritising innovation, additional support for particular sectors (especially those known as the IS-8 in the Industrial Strategy) and further funding in certain geographical areas.
• Astute management teams will be identifying where they can find support for their business, making the relevant contacts and taking note of news insights as they are published following this Budget.
• For high growth and scale-up businesses, the increase in investment limits for EIS and VCT schemes may increase investor appetite in your business, which can support growth and boost your valuation.
• Fiscal support with further tax allowances may be found in areas around capital expenditure, research & development and digitalisation, so do speak to our team about this.

2. Employee involvement in your business

• There are some changes to the eligibility rules of employee management incentive (EMI) schemes including increasing employee limits and values.
• These schemes can help to retain key management either before or after a transaction, which will support higher valuations as they reduce the risk for any future purchaser of your company.
• They provide more options if you are planning a management buyout as your potential exit route.
• The reduction in the capital gains tax benefit of the EOT (Employee Ownership Trust) route from 100% relief to 50% relief, may dissuade some business owners from choosing that exit route. It’s also worth noting that Business Asset Disposal Relief (BADR) is not available if you take the EOT relief route.

3. Inheritance Tax planning remains a priority for business owners

• The changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) announced in last year’s Budget have largely remained in place and will take effect from 6^th April 2026.
• For business ownership valued at more than £1m, there could be a 20% inheritance tax liability when those assets are passed to the owner’s beneficiaries.
• Each business owner will retain 100% for the first £1m and the Budget announced that £1m can be passed to a surviving spouse, so they would have £2m relief on their death.
• Any value above that, which will mean a valuation exercise for HMRC, will be subject to inheritance tax.
• There are several possible planning measures which can be put in place, so do speak to our team about your own personal situation and how you can potentially mitigate this cost.

Final Thoughts

The 2025 Budget offers mixed news for owners considering a sale or acquisition and they will affect valuations and exit planning.

If you are considering business growth, funding or succession, please seek advice around your timetable and tax strategy, in light of these changes and call us for an initial talk through options.

You might also be interested to learn more about our exit planning workshops. Details can be found here. <<link to https://www.nicholsonscharteredaccountants.co.uk/our-services/exit-planning/ >>