Autumn Budget Rewards Risk-Takers But Creates Two Classes Of Founder

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Chancellor John Healey’s first Budget will hand high-growth founders the most generous tax relief since 2020 but halves the lifetime limit on the relief many other business owners rely on, according to accountancy and business advisory firm Johnston Carmichael.

From 6 April 2027, qualifying founders of high-growth, innovative companies will benefit from a new 10%, compared with the standard 24% rate, on up to £10m of lifetime gains. Eligibility will be set following a technical consultation, but the conditions are likely to be stringent.

On the same date, the lifetime limit for Business Asset Disposal Relief (BADR), which reduces the CGT rate to 18%, is halved from £1m to £500,000. A founder who qualifies for the new relief on the full £10m could save up to £1.4m while those who rely on BADR will see their maximum saving fall from £60,000 to £30,000. The Treasury says three in four BADR claimants will be unaffected.

Alex Docherty, Partner and Head of Private Client Tax at Johnston Carmichael, said:

“Ahead of the Budget, we said founders needed a relief that properly rewards the risk of building a business. For high-growth, innovative companies, the Chancellor has delivered exactly that. A 10% rate on up to £10m tells anyone building the next big British business that the UK wants them to do it here."

“But this Budget has created two classes of founder. The engineering firm, the hotel, the family business that sustain jobs in local communities – these are the backbone of the economy, and most are unlikely to count as high-growth and innovative. The cut to Business Asset Disposal Relief affects exactly the owners who spent a lifetime building something substantial. The consultation on who qualifies for Founders’ Relief must address that divide.”

On business tax, the government reaffirmed its Corporate Tax Roadmap. The main rate of corporation tax remains capped at 25%, and full expensing continues for qualifying expenditure. But the balance of capital allowances has shifted. The main First Year Allowance rises from 40% to 50% for qualifying expenditure from 1 January 2027, while the main Writing Down Allowance falls from 14% to 12% from April 2027.

John McAuslin, Partner and Head of Corporate Tax at Johnston Carmichael, said:

“Keeping the 25% cap and full expensing gives businesses planning significant capital investment some continuity. But spending that doesn’t qualify for full expensing will now be relieved more slowly. Any business contemplating material capital expenditure should look carefully at the timing and nature of that investment, and at whether it can qualify for full expensing or the enhanced First Year Allowance.”

David Ward, Partner and Head of Tax at Johnston Carmichael, urged owner-managed and family businesses to watch a potentially significant reform of how company distributions are taxed. The proposals aim to stop profit extraction being structured to obtain more favourable tax treatment, with draft legislation due for consultation in 2027 and the new rules expected from April 2028.

He said:

“The government has committed to protecting capital treatment for genuine changes in ownership, including family business succession, and intends to expand demerger relief in some circumstances. These commitments are welcome, but the detailed rules will be critical in determining how effectively legitimate succession, shareholder exits and commercial reorganisations are protected.”

David also pointed to the sector-specific taxes funding targeted support. The Bank Corporation Tax Surcharge doubles from 3% to 6% for 15 months to help pay for lower energy bills, while Machine Games Duty on higher-stake machines rises from 20% to 25% from April 2027 to help fund a real-terms freeze in business rates for retail, hospitality and leisure properties in England.

It remains to be seen whether Scotland will follow. The Scottish Government will receive an additional £600m through the Barnett formula over the Spending Review period and sets its own Budget on 3 December.

David added:

“The Chancellor has promised breathing space now and fresh hope for the years ahead. But what businesses need most from a Budget is long-term certainty, and once again the rules have changed for people trying to plan ahead. Business Asset Disposal Relief is a case in point. Since 2020, the lifetime limit has gone from £10m to £1m and now to £500,000, and the rate has nearly doubled from 10% to 18%."

“Businesses are built over a lifetime, not a single Parliament. Owners need to plan succession years in advance, and repeated changes to the tax treatment of business disposals make that planning more difficult."

“Moves such as asking Ofgem to scrap gas standing charges are welcome, but they’re tinkering at the edges. A tax system set for the long term and then left alone would do far more for investment and growth than another round of adjustments.”

For more information on Johnston Carmichael, please visit  here.

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Feb 14, 2025

2 min read

UK-listed companies with a Defined Benefit (DB) pension scheme issued 81 profit warnings in 2024, the highest annual volume since the pandemic in 2020 (249 warnings), according to EY-Parthenon’s latest Profit Warnings report. In total, nearly one-in-four (24%) UK-listed firms with DB sponsors issued a profit warning last year.

The number of warnings issued by UK-listed companies with a DB pension scheme in 2024 made up almost a third (30%) of the 274 total from all UK-listed companies – the highest annual proportion since 2020 (43%).

Highest quarterly volume of warnings since same period of 2020

In the final quarter of 2024, 28 profit warnings were issued by UK-listed companies with a DB pension scheme, a year-on-year increase of six warnings and the highest quarterly total since Q4 2020.

UK-listed Household Goods and Home Construction firms behind the most warnings, with contract issues the leading cause

Companies with a DB pension scheme in the FTSE Household Goods and Home Construction sector issued the highest volume of warnings during 2024 (15), followed by FTSE Industrial Support Services (12) and FTSE Retailers (seven).

Rising costs (28%), contract issues and spending delays (26%) and credit tightening (11%) were cited as the main reasons for warnings from UK-listed companies with a DB pension scheme.

Karina Brookes, UK Pensions Covenant Advisory Leader and EY-Parthenon Partner, said: “The latest profit warnings data demonstrates the ongoing impact of external challenges such as global geopolitical uncertainty and policy upheaval on companies’ forecasting abilities. In this environment, strategies for companies with a DB sponsor need to respond to both short-term policy changes and deeper structural issues, whilst being mindful of the changing pensions regulation including the new DB Funding Code."

“All valuations from September 2024 will now fall under the new code, which emphasises the importance of covenant and the requirement to fund the scheme as soon as cash flows allow. For companies that are issuing a profit warning, there is a delicate balance between investing cash back into the business to improve longer term prospects and, if it is needed, using the cash available to fund the scheme in accordance with the guidance."

“At the same time, companies issuing profit warnings that have well-funded schemes may consider whether they are able to use scheme surpluses as a source of cash support, provided there is the right support structure and agreement with the trustees in place to extract the surplus.”

Paul Kitson, UK Pensions Consulting Leader at EY, added: “While average DB funding remained robust throughout 2024, the high number of profit warnings from listed UK firms with a DB pension scheme suggests not all schemes are out of the woods yet. At the same time, many trustees and companies are still digesting the Government’s recent surplus return proposals, so balancing the funding level, covenant strength and potential use of surplus will be a delicate balance."

"As ever, it is critical for both trustees and companies to work together to understand their scheme, its employer covenant, and their best path forward – whether that be aiming to run-on with additional contributions, run-on with surplus release, or buy-out.”

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Autumn Budget Rewards Risk-Takers But Creates Two Classes Of Founder

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