Tax risk heightened for business owners as disposal relief rate rises

While the four percentage point increase may appear modest, advisers say the financial impact on sellers could be substantial.

For owners disposing of businesses valued at around £1million, the higher rate could result in tens of thousands of pounds in additional tax if a sale completes after the deadline.

With roughly three months remaining until the new rate takes effect, advisers say many owners may already be at risk of missing the cut-off.

The difficulty lies in the practical realities of completing a business sale within a limited timeframe.

Even well-prepared transactions typically take between six months and a year to progress from early discussions to completion.

Each stage of the process presents potential delays that can quickly extend timescales beyond initial expectations.

Due diligence is a frequent source of delay, particularly where financial, legal or operational records are incomplete.

Intellectual property reviews can also add time, especially where ownership or registration issues need to be clarified.

Slow-moving buyers, lender requirements and protracted negotiations at the final stages of a deal can further stretch timelines.

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Property-related issues are another common cause of stalled transactions.

Outdated lease agreements, missing landlord consents, unclear occupation rights and gaps in historic documentation can all delay completion.

Advisers say these issues are often resolvable but rarely quickly, and usually involve additional professional costs.

James Howell, managing director at corporate law specialists Rubric Law, said many sellers underestimate what determines the pace of a transaction.

“One of the biggest misconceptions sellers have is that a business sale is simply a negotiation on price.”

He said timelines are more often dictated by the underlying mechanics of the deal rather than the headline valuation.

Financial scrutiny is another factor that can significantly slow progress.

He added: “If a business has incomplete, inconsistent, or poorly organised accounts, buyers will naturally raise more questions.”

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This can lead to longer due diligence periods and tougher deal terms, and extended scrutiny often results in tighter warranties, indemnities or price renegotiations.

He said first-time sellers are frequently surprised by how much time is required to assemble information that buyers expect to be readily available.

Advisers say this lack of preparation can materially affect completion dates.

Mr Howell said business owners planning an exit should ideally begin preparing several months before formally entering the market.

“This buffer gives sellers more control over the pace of a transaction.”

He said control over timing is particularly important for those aiming to complete before tax changes take effect in April 2026.

Advisers say several recurring issues regularly derail sales.

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These include disorganised financial records, gaps in regulatory compliance and irregularities in employment contracts.

Outstanding property matters are also cited as a frequent source of delay.

Even relatively short delays of a few weeks can be enough to push completion beyond the tax deadline.

This could leave sellers facing a higher tax charge despite having agreed terms in principle.

For entrepreneurs considering a sale within the next year to 18 months, advisers say preparation is increasingly critical.

They say realistic valuations and well-organised financial and operational documentation are now essential to maintaining deal momentum.

With the higher relief rate approaching, advisers say early preparation may be the key factor in determining whether a sale completes in time.