The 2025 Budget changed Capital Gains Tax rates for share disposals. If you own an agency and have been thinking about selling shares, whether a full exit, a partial sale to a new partner, or restructuring before retirement, the numbers you were working to have shifted.
From 30 October 2024, the lower rate of CGT on share disposals rose from 10% to 18%. The higher rate rose from 20% to 24%. Business Asset Disposal Relief (formerly Entrepreneurs' Relief) increased from 10% to 14% on 6 April 2025, and is scheduled to rise again to 18% on 6 April 2026. The £1 million lifetime limit is unchanged.
This article explains exactly what changed, how the new CGT rates 2025 agency founder shares calculations work, and what you should do if you are planning an exit.
The Rates: Before and After
Let's get the numbers on the table first. These are the rates that apply to disposals of shares in a trading company, which covers almost all agencies, where you do not qualify for relief.
| Scenario | Before 30 Oct 2024 | From 30 Oct 2024 |
|---|---|---|
| Basic rate taxpayer (gains within basic rate band) | 10% | 18% |
| Higher rate taxpayer | 20% | 24% |
| BADR qualifying gains (up to £1m lifetime) | 10% | 14% (rising to 18% on 6 April 2026) |
The basic rate band for CGT purposes still follows your income tax bands. If your total taxable income plus gains keeps you within the £50,270 basic rate threshold, the first slice of your gain is taxed at 18% instead of 10%. Anything above that is at 24% instead of 20%.
For a typical agency founder selling shares, the practical effect is this: you will pay roughly 4% more tax on gains that exceed the BADR allowance, compared to the pre-Budget position.
Business Asset Disposal Relief: Still the Best Deal in Town
BADR is 14% from 6 April 2025 (was 10% before then) on the first £1 million of qualifying lifetime gains. That has not changed. For most agency founders, this is still the most important relief to plan around.
To qualify for BADR on a share sale, you must meet all of the following conditions:
- You have held at least 5% of the shares and voting rights in the company
- You have been an officer or employee of the company (director or employee)
- The company has been a trading company (or holding company of a trading group) throughout the 2 years before the sale
- The shares have been held for at least 2 years before the disposal
Most agency founders will meet these conditions. The trap is the lifetime limit. Once you have used your £1 million BADR allowance, all future gains on share disposals are taxed at the new higher rates, 18% or 24%.
If you have already made a previous claim for Entrepreneurs' Relief or BADR, check your remaining allowance. HMRC tracks this on your self-assessment records, but you should keep your own running total.
Worked Example: A 12-Person Digital Agency
Let's run a real example. Sarah owns 100% of a digital agency in Manchester's Northern Quarter. She has been running it for 8 years. The agency turns over £1.2 million and makes £280k profit. Sarah wants to sell her shares to a larger group for £1.5 million.
Her gain is roughly £1.5 million minus her original subscription cost (say £100). So £1,499,900.
Under the old rates (pre-October 2024):
- First £1m at 14% (BADR): £100,000
- Remaining £499,900 at 20%: £99,980
- Total CGT: £199,980
Under the new rates:
- First £1m at 14% (BADR): £100,000
- Remaining £499,900 at 24%: £119,976
- Total CGT: £219,976
That is an extra £19,996 in tax. Painful, but not catastrophic. The key point: BADR still saved Sarah £70,000 compared to paying 24% on the whole gain.
If Sarah had already used her BADR allowance, her tax bill under the old rates would have been £299,980. Under the new rates, it is £359,976. That £60,000 difference is the kind of number that changes exit timing decisions.
What This Means for Agency Exit Planning
The CGT rate increase does not make selling an agency unviable. But it does change the financial model. If you were targeting a specific net return from your exit, you now need a higher gross sale price to get there.
For example, if you wanted to walk away with £2 million after tax, and you had full BADR available, you needed a sale price of roughly £2.1 million under the old rates. Under the new rates, you need around £2.13 million. Not a huge shift.
But if you have no BADR left, the numbers change more. To net £2 million after tax at 24%, you need a sale price of roughly £2.63 million. Under the old 20% rate, you needed £2.5 million. That £130k gap matters.
This is where exit planning becomes more than a theoretical exercise. If your BADR allowance is partially or fully used, the new rates mean you should either:
- Push for a higher valuation, or
- Structure the deal differently (earn-outs, share exchanges, vendor loan notes)
We cover deal structuring in more detail later. But the headline is this: the 24% rate makes it more expensive to sell in cash, and more attractive to consider alternatives that defer or reduce the gain.
Holding Company Structures and CGT Planning
One structure that has become more relevant since the Budget is the holding company model. If you own your agency through a holding company, you can sell the shares of the trading subsidiary without triggering a personal CGT charge, provided you meet the conditions for the Substantial Shareholding Exemption (SSE).
SSE exempts the gain on a disposal of shares in a trading company from corporation tax, provided the holding company has held at least 10% of the shares for at least 12 months. The proceeds sit in the holding company, not in your personal name. You can then extract them over time via dividends, or reinvest them into a new venture.
This structure is not new, but the Budget makes it more attractive. If you are a higher-rate taxpayer and you sell shares personally, you pay 24%. If you sell through a holding company and meet SSE conditions, you pay 0% corporation tax on the gain. The money is then in the company, not your pocket, but that might be exactly what you want if you plan to reinvest.
If you do not have a holding company in place, setting one up now and transferring your shares across needs to be done carefully. HMRC has anti-avoidance rules (specifically, the "value shifting" provisions in TCGA 1992, s29-34) that can recharacterise the transfer as a disposal. You need professional advice before attempting this.
Our agency services team regularly advises on holding company structures for exit planning. If you are considering this route, speak to us before making any share transfers.
Deferral Strategies: Loan Notes and Earn-Outs
If you are selling shares for cash, the gain crystallises on completion. You pay CGT in the following tax year (or in two instalments if the sale spans a tax year boundary).
But many agency sales are not all-cash. Buyers often structure deals with earn-out payments or vendor loan notes. These can help you defer the gain, and potentially reduce the tax rate.
Earn-outs: If part of your consideration is contingent on future performance (e.g. the agency hitting revenue targets over the next 2 years), the gain on that element may not crystallise until the earn-out is satisfied. HMRC treats earn-out rights as a separate asset in some cases. With careful drafting, you can spread the gain across multiple tax years, keeping more of it within the basic rate band (taxed at 18% rather than 24%).
Vendor loan notes: If the buyer issues you with loan notes as part of the consideration, you can elect to defer the gain until the loan notes are redeemed. This is a powerful tool if you expect to be in a lower tax bracket in a future year, for example, if you plan to retire and have no other income.
Both strategies require legal and tax advice tailored to your specific deal. Do not rely on generic templates. A poorly drafted earn-out clause can trigger an immediate CGT charge on the full deemed consideration, defeating the purpose.
What About Partial Sales and Dilution?
Not every agency founder sells 100% of their shares. Some sell a minority stake to bring in a new partner, raise growth capital, or reward a key employee. The same CGT rates apply to partial disposals.
If you sell 20% of your shares for £300,000, your gain is calculated by reference to the base cost of that 20% slice. The same BADR conditions apply, but you need to have held the shares for 2 years before the disposal, and you must still be an officer or employee at the time of sale.
One common scenario: a founder sells 10% to a new managing director, retains 90%, and continues running the agency. The sale of that 10% triggers CGT at the new rates. If the founder later sells the remaining 90%, the BADR allowance applies to the gain on that later sale, but only if the 2-year holding condition is still met at that point.
This is where timing matters. If you sell a small stake now and the full exit happens 3 years later, the BADR clock resets on the retained shares? No, BADR looks at the 2 years before each disposal. As long as you have held the shares for 2 years before the later sale, and you still meet the officer/employee and trading company conditions, BADR applies.
But if you sell a minority stake and then leave the business (ceasing to be an officer or employee), you lose BADR eligibility on the remaining shares. Plan carefully.
Practical Steps Before You Sell
If you are considering selling shares in your agency, whether now, in 12 months, or in 5 years, here is what to do before you instruct lawyers or sign anything.
- Check your BADR position. How much of your £1 million lifetime allowance is unused? If you have never claimed BADR or Entrepreneurs' Relief, you have the full £1 million. If you have, dig out the records.
- Run the numbers at both rates. Model your exit at 14% (BADR), 18%, and 24%. Know what you will actually pay before you negotiate the sale price.
- Review your shareholding structure. Do you hold shares directly, or through a holding company? If directly, is there time to restructure before the sale? If through a holding company, does SSE apply?
- Consider the timing. If you are close to the 2-year BADR holding period, wait. If you have already held for 2 years, the timing of the sale within a tax year can affect when you pay the tax (by 31 January following the tax year of disposal).
- Speak to your accountant. Not a generic conversation. A specific, numbers-on-paper meeting about your exit plan. Contact us if you want to run through your situation.
The Bottom Line
The 2025 Budget increased CGT rates on share disposals from 10%/20% to 18%/24%. For most agency founders, the practical effect is a 4% increase on gains above the £1 million BADR threshold. BADR is 14% from 6 April 2025, unchanged.
This is not a reason to panic or rush an exit. But it is a reason to plan. If you have been thinking about selling shares, the numbers have changed. Run them again. And if you have already used your BADR allowance, the new 24% rate makes alternative structures, holding companies, loan notes, earn-outs, significantly more attractive.
As ICAEW qualified accountants working exclusively with agency founders, we see these Budget changes through the lens of real exits. If you want to understand exactly what the new CGT rates 2025 agency founder shares mean for your specific agency, book a call with our team. We will run the numbers with you, not at you.