Nearly a third (29 per cent) of business owners in the UK have accelerated their exit strategies over the past year amid concerns of potential tax hikes in the upcoming Budget.

Research from Evelyn Partners found that this was up from 23 per cent accelerating business exits 18 months ago.

Nearly a quarter (23 per cent) of the 500 business owners with turnovers of £5m or more surveyed had fast-tracked their exits over the past year due to worries about a potential increase in capital gains tax (CGT).

Furthermore, 20 per cent did so because of fears of potential cuts in inheritance tax (IHT) reliefs, which would make it more costly to pass businesses on to the next generation.

Evelyn Partners noted that while the government had ruled out raising the main rate of corporate tax above 25 per cent, it had remained “tight-lipped” on the outlook for CGT rates and IHT reliefs.

However, tax concerns were not the only factors, with a quarter (25 per cent) of business owners accelerating their exit strategies due to personal finance challenges, which resulted in a need to access the capital tied up in their business.

Almost a quarter (24 per cent) had fast-tracked business exits because of increased costs of accessing capital due to rising interest rates.

Commenting on the findings, Evelyn Partners tax partner, Laura Hayward, said: “As the countdown to the Budget on October 30th ticks away, we have been contacted by an increasing number of business owners worried about what the Chancellor will do to CGT and IHT.

“The Prime Minister’s statement that the upcoming Budget would be ‘painful’ has put owner-managed businesses on edge and this has prompted many to want to exit as quickly as possible.

“The fact that more business owners have fast-tracked their exit plans in the last year compared to when we conducted similar research 18 months ago tallies with our own anecdotal experiences. As opinion polls increasingly suggested a change in government and the consequential potential for tax changes was becoming more likely, an increasing number of business owners have got in touch with us to have conversations about business exits.

“The business environment for many owners has already been tough enough in recent years as they have worked hard to rebuild their businesses after the pandemic, against a backdrop of cost-of-living pressures and high inflation.

“Add to that the potential for unfavourable tax changes in the upcoming Budget and it’s completely understandable that some are hoping to realise the gains of their successes sooner rather than later.”

Of the business owners working towards a business exit, family succession was the most popular strategy (22 per cent), followed by establishing an employee ownership trust (16 per cent).

Hayward noted that, as family succession was the most popular exit strategy vehicle, there was an added urgency for many business owners to get their tax affairs in order ahead of the Budget.

“Speculation is rife that the Chancellor will curtail business relief, which can help to soften burdensome IHT liabilities, and we have had conversations with many business owners who want to fast-track succession plans while this valuable relief is still available,” she continued.

“Setting up employee ownership trusts has been gaining ground as an exit strategy for business owners in recent years, so it’s no surprise to see these score highly in the research. Setting up an employee ownership trust can be a faster process than going to market, while at the same time giving business owners greater control of the valuation of the business.

“Whatever strategy is used, exiting a business is a really big decision for business owners and it’s important that they put in place a plan that is appropriate for them and their business. They need to carefully consider a range of factors, with possible changes to the tax regime being just one aspect.

“Holistic advice considering both the business and personal implications of a sale will help make the exit – which can be fast-tracked if need be - as successful as possible.”

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