The Exit Planning Landscape Has Changed. Here Is What To Do About It.

There is a particular kind of costly mistake that does not announce itself. It accumulates quietly: in the gaps between advisers, in planning decisions made without full context, and in conversations that happen too late to change anything. For business owners approaching an exit, 6 April 2026 has made those gaps even more consequential.

Two changes came into force this month, each significant in isolation and more so in combination. Business Asset Disposal Relief has risen to 18%, completing a two-stage increase from 10% in 2024. Business Property Relief, the inheritance tax exemption that many founders relied on to shelter the full value of their shareholding, is now capped at £2.5 million per person for 100% relief; 50% max available thereafter.

The structures that protect value still exist. But they require more lead time, more thought, and more integration across corporate finance, tax, and wealth management than most founders have historically applied. The penalty for assuming that what worked before will work now is measurable, and in many cases avoidable.

The New Tax Map: What Changed and Why It Matters

Business Asset Disposal Relief, or BADR, reduces the rate of Capital Gains Tax on qualifying disposals of business assets. It applies to the first £1 million of qualifying gains over an individual’s lifetime; gains above that threshold are taxed at standard CGT rates, currently 24% for higher rate taxpayers. For gains within the relief, the rate has now reached 18%, having risen from 10% to 14% from April 2025, and again to 18% from 6 April 2026. The relief remains valuable, but its value has diminished materially over years (who remembers the heady days of £10m lifetime allowance?).

The inheritance tax position has also changed significantly. Business Property Relief previously applied at 100% to qualifying business shares with no cap on value, meaning a founder who died holding their business, or who transferred shares into a trust, could in many cases do so without any IHT charge regardless of the size of the stake. From April 2026, the 100% exemption applies only to the first £2.5 million of combined qualifying business property per individual. Above that threshold, only 50% relief is available, which produces an effective IHT rate of 20% on the excess in a taxable estate. Any unused allowance is transferable to a surviving spouse, meaning couples can shelter up to £5 million in qualifying assets between them before IHT arises. For a single founder with a £10 million shareholding, however, the change creates a potential IHT liability of £1.5 million that did not exist under the previous rules.

The Planning Structures: What Is Still Available

Pre-sale trust planning is a common consideration for many business owners. Where Business Property Relief applies within the £2.5 million cap, shares can be settled onto a discretionary trust before binding terms on a sale are agreed, typically free from IHT and CGT. Once inside the trust, subject to it being correctly (care re: who is listed in the discretionary class of beneficiaries) those assets sit outside the founder’s estate, positioned for future generations. The critical constraint is timing: planning needs to be undertaken before there is any argument that a ‘binding contract for sale’ has been established. There is no retrospective fix and no extension. For any founder potentially considering an exit, this conversation needs to happen sooner rather than later.

Post-exit investment structure is a decision that shapes the tax position of every return generated thereafter. For founders looking to invest an element of their cash proceeds for long-term future growth (or those that may have ‘missed the boat’ on the above noted trust planning), a Family Investment Company (“FIC”) deserves serious consideration. The comparison is direct: Corporation Tax at 25% versus Income Tax at up to 45%. Most dividends received by a UK company benefit from a long-standing corporate dividend exemption, meaning they can be received by the FIC without a Corporation Tax charge. The same income received personally now attracts up to 39.35% for additional rate taxpayers – a stark contrast. The structure is efficient when returns are reinvested; where the majority of returns are needed for personal expenditure, the cost of extraction can outweigh the tax saving inside the company, and the case becomes less compelling. Understanding which situation applies, and which assets to hold within the FIC is precisely where the planning starts.

There are also wider asset protection and IHT mitigation benefits that a FIC can bring. The class of shares can be split into those with ‘control’ (i.e. voting rights but limited economic rights) and those with ‘economics’ (i.e. capital and income rights but no voting rights), which alongside carefully constructed articles of association and shareholders agreements, which clearly document transfer provisions and governance rights (e.g. Board of directors), asset protection is enabled. From an IHT perspective, often referred to as ‘growth’ and ‘freezer’ share planning, it is possible to split the class of shares so that, for example, founders have a class of shares that ‘freezes’ their current economic entitlement in the FIC with the next generation having a class of shares which carries the right to future growth in value of the FIC. No 7 year clock, just a mechanistic delivery of growth in value.

Offshore insurance wrappers offer a complementary structure for those with a longer time horizon or for those who may leave the UK in future. Up to 5% of the original investment can be withdrawn each year on a tax-deferred basis, with the gain deferred until a chargeable event occurs. Where the bond is encashed while the investor is non-UK resident, there is generally no UK tax charge on the gain at that point. Consideration should be given to the jurisdiction in which the individual is resident at the time of encashment to ensure local compliance and global tax-efficiency. Care is also needed in terms of which assets are held within such a structure – punitive UK tax charges apply to what are referred to as ‘personal portfolio bonds’ – a costly mistake where investment strategy is not aligned with tax planning objectives.

EIS and SEIS investments offer a further avenue for those deploying capital into growth companies. SEIS provides income tax relief at 50% on investments of up to £200,000 per year; EIS provides 30% income tax relief on up to £1 million per year, or £2 million for knowledge-intensive companies. Both offer the potential for a CGT-free exit on qualifying holdings, subject to conditions. EIS offers “CGT deferral” (i.e. capital gains made up to three years before or one year after the EIS subscription was made can be ‘deferred’ up to the value of subscription) – care taken here re: where future CGT rates may go (if they increase, the deferred gains are thus subject to tax at a higher rate of CGT than they would have been – cashflow advantage & investment return potential needs to be considered against this). For SEIS, up to 50% of the subscription amount can have gains ‘exempted’ – the gain needs to fall in the same year as the SEIS income tax relief. For those with the right risk appetite and time horizon, the efficiency of these structures in a higher-tax environment is significant, and they deserve a considered place in any post-exit investment plan. We would always advise that the investment position is considered first i.e. is this an investment opportunity that would be interesting on a risk adjusted basis absent any of the tax reliefs? If the answer to that question is “yes”, then it is worth exploring whether and how SEIS/EIS relief may be available.

The Transaction: Where Structure Determines the Outcome

The financial terms of a transaction, how much is paid, in what form, and when, carry tax consequences that are frequently underweighted in deal negotiations. Cash at completion, loan notes, rolled equity, and deferred consideration are not commercially equivalent choices with different labels. They are materially different instruments, with different tax treatments, different cash flow profiles, and different implications for what the seller ultimately retains.

Loan notes are frequently used in private equity-backed transactions to facilitate a rollover, where a seller reinvests a portion of their proceeds alongside the buyer into the acquiring structure. Used correctly, this can preserve Business Asset Disposal Relief on the qualifying cash element while deferring the gain on the rolled portion. The use of loan notes to roll consideration into Topco equity is also a well-established technique, but it requires careful execution. Structured carelessly, it can produce precisely the opposite of the intended tax outcome.

Dry tax charges represent one of the more serious risks in a poorly planned transaction. A dry tax charge arises when tax falls due on value the seller has not received in cash. Deferred consideration, whether a fixed amount payable in future tranches or a performance-contingent earnout, can produce a cashflow problem if it has not been modelled before heads of terms are agreed. The cash flow implications of a tax liability that precedes the receipt of funds to pay it can be severe.

Employment-related securities (“ERS”) rules add complexity in many transactions. Where they apply, a capital gain that would otherwise attract CGT at 18% or 24% can be recharacterised as employment income taxed at up to 47%. The conditions under which this applies are technical; the financial consequences are not. Identifying and resolving potential ERS issues before the transaction completes is not an optional refinement but a fundamental step in protecting the management team’s position.

The Financial Integration Advantage: One Conversation, Not Three

There is a structural problem in the way most business exits are advised. Corporate finance focuses on enterprise value and deal mechanics. The tax adviser works on structure, reliefs and compliance. The wealth manager is called after completion. Each discipline does its job well within its own scope. What is frequently missed are the interactions between those three elements: the compounding effects of a decision made in one area on the outcomes in another.

A transaction structured without regard to the shareholder’s post-exit investment plan, leaving them facing income tax on returns that could have been sheltered. Roll-over equity and/or loan notes accepted without considering the CGT profile of the underlying asset or counter-party risk. A trust established with sound IHT intent but no consideration of the investment strategy that will sit inside it for the next generation. These are not failures of any individual adviser. They are the predictable result of good advisers working in sequence, without a shared view of the whole.

In an environment where BADR is costlier and BPR has a ceiling, the interactions between these disciplines have become more consequential, not less. A transaction structure that works well from a corporate finance perspective can still be poor from a tax one. A trust that makes sense for IHT purposes can be misaligned with the long-term investment strategy. An asset allocation that is efficient in a personal name can work substantially better inside a company structure. Seeing all of this simultaneously, and advising on the connections rather than the components, is where the real value is created.

At Hundle, we work across corporate finance, tax, and wealth management as a single integrated conversation. Not three engagements conducted in parallel, but one view of the whole: the transaction structure assessed for its tax efficiency before it is agreed, the post-exit investment framework designed around the founder’s actual tax position, and the family wealth strategy built before the deal completes rather than assembled from whatever remains afterwards.

What to Do Now

For founders who are two or more years from a potential exit, the priority is shareholder structure: whether the available reliefs are being maximised, whether ownership is correctly positioned for both CGT and IHT purposes under the new rules, and whether there are restructuring steps that are straightforward today but unavailable once a sale process begins.

For those within twelve months of an exit, the focus shifts to active planning: trust structures where appropriate and within the available relief, transaction scenario modelling across all consideration types, and an early understanding of what each deal structure means for the after-tax proceeds. The post-exit investment framework should also begin to take shape at this stage, not after completion.

For those in the middle of a transaction, the work is execution: ensuring the structure is as efficient as possible, that dry tax charge risks have been identified and addressed, and that the employment-related securities position for any management participants has been properly reviewed. These are decisions with material financial consequences that need to be made while the transaction can still be shaped.

The tax environment of 2026 is more demanding than the one that preceded it. The opportunity, to build, protect, and pass on substantial value, is unchanged. What has shifted is the standard of advice required to capture it.