What Andy Burnham as Prime Minister could mean for business owners considering a sale and UK tax policy.
Like many people, I’ve been reflecting on the growing expectation that Andy Burnham could become the UK’s next Prime Minister.
On a personal level, I have a great deal of respect for Andy. Through my work in the healthcare sector, I’ve followed his career closely and always found him to have a strong grasp of complex issues and a pragmatic approach to leadership.
But regardless of anyone’s political views, a change in leadership inevitably raises questions for business owners. Particularly those thinking about their future, their wealth and their exit plans.
And right now, one of the biggest questions business owners are asking is: what could a Burnham government mean for Capital Gains Tax (CGT) and the value of a future business sale?
The challenge facing business owners
Andy Burnham has indicated that he would honour Labour’s existing commitments not to increase income tax or National Insurance. Yet the UK still faces significant pressures: public investment is needed, economic growth remains a priority and the legacy of Covid-era borrowing continues to weigh heavily on public finances.
That’s why CGT is increasingly being discussed as a potential source of additional revenue.
At this stage, much of the debate remains speculation. However, rumours of CGT rates moving closer to higher-rate income tax levels have understandably focussed the minds of entrepreneurs and shareholders.
For business owners, the implications can be significant.
Let’s take a simple example. You sell a business and generate a £10 million gain. If CGT rates were increased to 45%, you would need a gain of approximately £13.8 million to achieve the same post-tax outcome.
That’s nearly 40% more value simply to stand still.
The obvious question is: can your business realistically grow enough over the next few years to bridge that gap?
For some businesses, the answer will be yes. For many others, it’s far less certain.
What history tells us. And what it doesn’t
We’ve looked at previous periods of CGT change to see whether clear patterns emerge.
The honest answer is that the data is, at best, inconclusive.
When CGT rates increased in 2010 and again more recently, tax receipts initially rose. That suggests many business owners took action before changes came into force. But those figures are influenced by a range of factors, including payment timing, property transactions, wider market conditions and strong growth in asset values in the preceding period.
The broader challenge is that every period is different.
The 2010 changes came immediately after the global financial crisis, when M&A markets remained subdued for several years. More recent changes followed a period of historically low interest rates, Covid-related asset inflation and significant geopolitical uncertainty.
What history does tell us is that uncertainty tends to encourage business owners to consider their options sooner rather than later.
Doing nothing is a strategy. But perhaps not the best one
For me, the biggest risk isn’t necessarily tax change itself. It’s waiting passively and hoping for clarity.
If tax policy does change, opportunities that exist today may no longer be available tomorrow. Equally, rushing into a decision without proper planning is rarely the answer.
Instead, business owners should use this period to think carefully about their long-term objectives and the different routes available to them.
A full sale isn’t the only option
When business owners think about succession or exit planning, they often immediately picture a complete sale.
That remains a viable route for many businesses, particularly where the owner is ready for a clean break and can achieve the right valuation. It isn’t the only option.
Increasingly, we are seeing entrepreneurs explore ways to de-risk while retaining future upside.
Private equity investors, banks and debt funds continue to have substantial capital available and are actively looking for quality businesses to back. That means there are opportunities for owners to take some money off the table today, while retaining a meaningful stake in the future growth of the business.
For many entrepreneurs, that can offer the best of both worlds: crystallising value today while remaining involved in creating future value.
Planning matters more than ever
Another area worth considering is whether there are opportunities to bank some of today’s tax position while continuing to grow the business in the future.
These solutions are rarely straightforward and will depend entirely on individual circumstances. But historically, effective planning has enabled many business owners to preserve wealth and better manage the impact of future tax changes.
The key point is that these opportunities generally require time, specialist advice and careful implementation.
They are not decisions that can be made overnight.
The key question every owner should ask
Ultimately, every business owner should be asking themselves a simple question:
If tax rates rise materially, can my business create enough additional value to offset the difference?
In our £10 million gain example, standing still could require almost 40% more value creation.
- Can profits grow enough to justify waiting?
- Can market multiples improve?
- Can the wider economy support those ambitions?
For some businesses, the answer will be yes. For others, bringing forward a transaction or exploring alternative structures may prove more attractive.
Now is the time to explore your options
Nobody knows exactly what a future Burnham government might do and any changes to CGT remain speculative at this stage. But uncertainty itself is a reason to act.
That doesn’t necessarily mean selling your business tomorrow. It does mean understanding your options, modelling different scenarios and developing a strategy that protects the value you’ve spent years building.
Whether that’s a full sale, a partial exit, external investment or wealth-planning opportunities, the best outcomes usually come from preparation rather than reaction.
The business owners who are best placed for whatever comes next won’t be the ones who wait and see.
They’ll be the ones who start planning today. Get in touch if you’d like to talk through your options.
