Key Takeaways for Buyers and Sellers of Accountancy Practices

1. Increase in Employer National Insurance Contributions (NICs)

The rise in Employer NICs by 1.2 percentage points to 15% from April 2025 is a significant factor to consider for both buyers and sellers. This increase will elevate the cost of employee compensation, which may impact profit margins for practices with larger staff counts. For sellers, this impending change might result in lower profitability, potentially affecting the valuation of their practice if they plan to sell in the near term. Buyers should consider the future cash flow implications of this increase, as it will become an ongoing cost that affects the practice's financial performance post-purchase.

• Employer NICs will rise by 1.2 percentage points to 15% from April 2025. This change will affect the cost structure for practices, potentially impacting their profit margins.
• For sellers, this could mean reduced profitability in the near term, potentially lowering the valuation of the practice. Buyers should consider these increased ongoing costs when evaluating the practice's financials.

2. Capital Gains Tax (CGT) Rate Increases

The budget outlines notable increases in Capital Gains Tax (CGT), with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%. These changes impact both buyers and sellers, particularly those selling a business asset like an accountancy practice. Sellers looking to exit the market and take advantage of existing lower rates might consider accelerating their sale timeline. Buyers, on the other hand, should factor in these increased CGT rates as they could affect potential gains upon the future resale of the practice.

• The CGT lower rate is increasing from 10% to 18%, and the higher rate from 20% to 24%. For business assets, rates will rise to 14% from April 2025, and match the main lower rate of 18% from April 2026.
• Sellers aiming for tax-efficient exits may find higher CGT liabilities, which could affect net returns on the sale of an accountancy practice. Buyers might face additional CGT considerations in future disposals if planning an eventual resale.

3. Changes to Business Asset Disposal Relief and Investors’ Relief

Incremental increases to Business Asset Disposal Relief and Investors’ Relief rates could impact tax liabilities for business owners when they sell their practices. These higher rates will gradually impact sellers’ post-tax profits, potentially diminishing the overall net gain from the sale. If sellers aim to benefit from current rates, they might need to consider accelerating their exit plans. Buyers could leverage this timing to negotiate purchase terms that are more favorable in light of the seller’s tax-driven urgency.

• These rates will increase gradually, impacting business owners' tax liabilities when they sell their practices.
• Sellers should consider accelerating their sale if they aim to benefit from current, lower rates. Buyers can use this timing to negotiate favorable purchase terms.

4. Corporate Tax Stability

The budget has capped the Corporate Tax rate at 25%, which provides valuable stability for planning future growth and investments. For buyers, this predictable tax rate helps in forecasting potential profits and supports a stable environment for business expansion. This low rate also enhances the appeal of purchasing an accountancy practice, as it ensures that future after-tax profits remain competitive.

• The Corporate Tax rate is capped at 25%, providing stability for planning future growth and investments. This low rate may make accountancy practices more attractive for buyers by supporting sustainable after-tax profits.

5. Incentives for Investment

With an increase in public investment, the government expects to attract private investment over the long term, creating a more encouraging environment for buyers planning to grow or modernize their practices post-purchase. Additionally, green investment incentives can help offset energy costs, particularly for practices with physical office spaces, enhancing operational efficiency.

• The government has increased public investment, expecting it to crowd in private investment, which could encourage buyers to expand or modernize practices post-purchase.
• Buyers may access incentives for green investments, which can reduce energy costs, especially beneficial for practices with a large physical footprint.

6. Adjustment in Public Service Spending and Reforms

Increased spending on public services, especially in sectors such as the NHS and infrastructure, may create opportunities for accountancy firms involved in these sectors, either directly or indirectly. Sellers could see these sector-specific opportunities add to the appeal and potential value of their practices, while buyers might find enhanced growth prospects if they align their services to meet the rising demand in these public sectors.

• Increased investment in public services, particularly in NHS and infrastructure, may create indirect opportunities for accountancy firms servicing related sectors.
• Buyers and sellers should consider sector-specific opportunities, especially in public sector accountancy, potentially boosting practice value.

7. Other Relevant Tax Changes

Additional tax adjustments may impact ownership transitions. For example, the treatment of inheritance tax on business properties could affect family-owned practices or generational transfers. Buyers planning on operational improvements may also benefit from allowances for energy-efficient equipment or upgrades.

• Changes to the inheritance tax treatment of business property could impact generational transitions or family-owned practices.
• The extension of allowances for energy-efficient equipment or upgrades may benefit buyers planning to improve operational efficiency.

Summary Impact

For buyers (Book An Appointment With Us), the budget’s measures offer stability in corporate tax rates and incentivise sustainable investments, which can support practice growth post-purchase. However, they should factor in increased NIC costs and potential tax liabilities on future disposals.

For sellers (Book An Appointment With Us), the increased CGT rates and NIC changes may lower after-tax profits from the sale, prompting them to consider selling sooner rather than later to capitalise on current tax rates.