Tech M&A advisory in London and the UK.

Business Asset Disposal Relief, formerly Entrepreneurs' Relief, is still the single largest tax lever in a UK founder exit, but it is shrinking. The October 2024 Budget set the rate at 14% for disposals from 6 April 2025 and 18% from 6 April 2026, while the main higher rate of capital gains tax rose to 24%. On a qualifying £1 million gain, the relief is now worth £60,000 against the main rate, down from £140,000.

The practical consequence is that timing and structure matter more than they did. The relief is capped at £1 million of lifetime gains, so on a larger exit most of the proceeds are taxed at 24% regardless. For founders with a spouse or long-standing co-founders who each meet the conditions, each individual has their own lifetime limit.

BADR is lost more often through housekeeping than through tax planning. The common failures are founders diluted below 5% of voting rights by a funding round without the post-2019 election being made, share classes that carry votes but not a 5% economic entitlement, companies holding enough cash or investments to be challenged as non-trading, and founders who stepped down as a director or employee more than two years ago. We review the capitalisation table against the conditions at the start of every UK sell-side mandate.

How deferred consideration is documented changes how it is taxed. A fixed deferred payment is generally taxed up front as part of the original gain. A genuinely uncertain cash earnout is typically treated as a separate asset, so later payments can be taxed without BADR. Taking the earnout in shares or loan notes, and making the right election, can keep more of it within the relief.

The commercial risk matters as much as the tax. Earnouts shift value to the buyer's post-completion decisions, so the targets, accounting policies and operating covenants need to be negotiated tightly. Our earnout modeller shows how the probability-weighted value compares with cash at completion.

UK deals split between locked box pricing, where the equity price is fixed against a historic balance sheet and protected by a no-leakage covenant, and completion accounts, where the price is adjusted for actual cash, debt and working capital at completion. Sellers usually prefer the certainty of a locked box. Buyers accept it when the accounts are reliable and the period between the locked box date and completion is short.

Warranty and indemnity insurance is now routine in UK mid-market deals and lets sellers cap their own liability for warranty claims at a nominal amount, often £1. The price is buyer-side diligence good enough for an insurer to rely on, which is one more reason to prepare the data room before going to market.

The National Security and Investment Act 2021 requires mandatory notification of acquisitions of control in 17 sensitive areas, many of which catch software companies: artificial intelligence, computing hardware, cryptographic authentication, data infrastructure, communications and satellite technology among them. There is no turnover threshold, so small deals are caught, and a notifiable deal that completes without approval is void.

UK merger control is voluntary but real. Since January 2025, the CMA can review deals where the target has UK turnover above £100 million or the parties share at least 25% of supply, with a new hybrid test for acquirers with large UK market positions and a safe harbour where each party has UK turnover below £10 million.

UK software businesses attract a deep pool of US strategic acquirers and US and European private equity, alongside domestic buyers. US buyers typically bring higher headline multiples and US-style deal terms. European sponsors are often more comfortable with locked box pricing and UK law documents. Running both in a single process is usually how the best terms are found. For pricing context, see the SaaS EBITDA multiples (opens in a new tab) and our sell-side process.