John Healey plots tax raid on retiring business owners in Budget

Business Asset Disposal Relief, which lowers capital gains tax when someone sells a qualifying business, could be significantly restricted, according to The Telegraph.

The money saved could instead fund lower capital gains tax rates or more generous reliefs for entrepreneurs who create jobs and economic growth in the UK.

The move would mark a shift away from the current system, which mainly rewards business owners when they sell their companies.

Economists have argued that this encourages tax planning rather than giving founders an incentive to reinvest and expand.

Labour introduced the relief in 2008 under its former name, entrepreneurs’ relief. It originally allowed eligible business owners to pay capital gains tax at 10 per cent on qualifying sales, up to a lifetime limit of £1million.

The Coalition government later increased the lifetime allowance to £10million. Rishi Sunak cut it back to £1million in 2020 following criticism that the relief disproportionately benefited wealthy business owners.

Rachel Reeves, Mr Healey’s predecessor as Chancellor, subsequently increased the tax rate to 14 per cent and then to 18 per cent in April 2026. The changes were introduced alongside inheritance tax reforms affecting farmers and business owners.

HMRC estimates that Business Asset Disposal Relief cost the Treasury £800million in the most recent tax year.

The Resolution Foundation, whose former chief executive Torsten Bell now serves as a Treasury minister, has branded BADR “Britain’s worst tax break”.

A review commissioned by Ms Reeves also questioned whether the relief was doing enough to stimulate investment and growth.

A consultation launched last year drew on the American experience, pointing to the so-called “PayPal Mafia” as a model for how successful founders can seed the next wave of companies.

Figures including Elon Musk and Peter Thiel used the proceeds from PayPal’s success to back new ventures, many of which grew into major businesses in their own right.

The Treasury has been studying proposals from both the Start Up Coalition and the Centre for British Progress, which have each advocated for tax incentives that reward founders who build companies and plough their gains back into new enterprises.

Dom Hallas, of the Start Up Coalition, said: “We rightly do lots in the tax system to incentivise those investing in start-ups in the UK, but a lot less to support the founders that actually build them.”

Mr Hallas added: “We’d love to see anything that encourages entrepreneurs themselves to not just start, but to scale and actually stay in the UK.”

However, business groups have warned that the changes risk punishing owners who spent years building successful companies and depend on the sale proceeds to fund their retirement.

Craig Beaumont, of the Federation of Small Businesses, said: “Small business owners work hard through their lives and rely on entrepreneurs’ relief when selling their business to fund their retirement.

“This relief has already been reduced and limited it must not be thoughtlessly discarded.”

Others described the plans as a further blow to family-owned firms, which employ nearly 60 per cent of private sector workers and pay more than £400billion in taxes, according to the Family Business Research Foundation.

Analysis from wealth manager Rathbones showed that just under 5,800 businesses were sold in 2025, an eight-year high and 70 per cent above 2018 levels, suggesting growing numbers of entrepreneurs doubt whether the rewards justify the risks.

Mr Healey has promised a Budget for Britain’s “bloody-minded entrepreneurs”, pledging to reduce red tape and “back business in Britain making a profit”.