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



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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The increase in Employers National Insurance Contributions is a significant cost for the family business sector which collectively employs 13.8 million people across the UK. These increases, irrespective of the sector in which a family firms operates represent an increased cost of doing business that will undoubtedly have consequences for many businesses, and for some result in the need for cost savings, redundancies and possible closures, especially in the labour intensive sectors such as retail and hospitality.


Family Business United, an organisation that champions the family business community across the UK worked with Cetin Suleyman, partner at accountants Goodman Jones to look at the financial impact that the changes could have.


Prior to the changes announced in the Budget, based on an average salary of £36,000 a year before taxes (based on the November 2024 Government data for average salary in England & Wales across all sectors) the cost of Employers NICs was £3,712. With the changes announced this rises to £4,650 per person, an increase of £938 a year per employee.


Due to the very nature of the different sizes of family businesses and a significant proportion employing less than 10 people, assuming that one in ten people employed in family firms are affected by the changes, that would be 1.38 million employees which at a cost of £938 per employee would result in increased contributions from family business employers of £1.3 billion a year.


However, we know form the Oxford Economics report into 'The UK Family Business Sector 2021-22' that 149,858 family firms employ more than 10 employees which would create a cost of £1.4 billion a year, assuming they all employed 10 staff.


We can also see that there are 18,303 employing more than 50 staff and 1,516 over 250 staff so this figure is clearly an underestimate of the full cost and burden on the family business sector.

Size of Businesses

Number of Firms

Small family firms (10-49 employees)

130,039 family firms

Medium family firms (50-249 employees)

18,303 family firms

Large family firms (250+ employees)

1,516 family firms

Total family firms

149,858 family firms

Source: The UK Family Business Sector Report 2021-22 (Oxford Economics)


As Paul Andrews, Founder & CEO of Family Business United explains, "This is a large burden on the family business sector and a cost that goes direct to the bottom line in family firms across the country. For many, coming after all the economic uncertainties of the past few years, Brexit, the global pandemic, supply chain issues and rising energy costs it could be the final straw. It will certainly result in different decisions being made in family business boardrooms across the country."


"Family businesses pride themselves on taking the long term view and building businesses to pass on to future generations, safeguarding jobs for their employees too, many who will be descendants in families that have worked in the business for generations too."


"However, they also need to be financially sustainable and we are already hearing of large family business employers have to change their plans for the future in order to afford the increases they are being faced with. Family businesses already contribute significantly to the Exchequer in terms of the taxes they pay and we have to be fearful that the increase to NIC's will result in firms reducing their investments, cutting back on recruitment and looking at their staffing models."


As Cetin adds "When the increase in National Insurance is factored in with the increase in National Minimum Wage outstripping inflation by 400% many businesses will have stark choices to make."


"Projecting the financial impact is one thing, but a more fundamental pivot will be around accelerating the use of technology, and particularly AI, to replace jobs and reverse rising employment costs. For family businesses, this could go completely against their key principles of people and purpose, but failing to look at all of the options could prove very costly indeed."

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