Lawyers at Birketts have warned that family business owners, including those in the farming sector, who are rushing through succession plans early to avoid the Chancellor’s Capital Gains Tax raid could be exposing their business to a future risk should their be a divorce in the family.

Birketts has said since the Chancellor of the Exchequer’s Autumn Budget the firm has seen a noticeable increase in shareholders within family-owned businesses looking to bring forward their succession planning to avoid increased CGT rates. Typically, shares are being passed to younger family members sooner (usually sons/daughters).

However, the firm is warning that this can give rise to other issues – such as what will happen to those shares if the person receiving them later goes through a divorce or separation.

Stefan Donnelly, family lawyer at Birketts, said: “One very effective method of ensuring that the shares in the family business are protected as far as possible is for the recipient to implement a pre- or post-nuptial agreement prior to the shares being transferred to them.

“For family business owners, a nuptial agreement can specifically outline what happens to the ownership of shares in the event of a divorce or separation. This ensures as far as possible, that a spouse who may not have been involved in the day-to-day running of the business, cannot lay claim to those shares.

“A nuptial agreement can protect the intended inheritance structure of the business by ensuring that shares are passed down to specific family members, such as children or grandchildren. This prevents potential conflicts if a business owner’s spouse decides to sell their shares or pass them on to non-family members, disrupting the family business’s continuity.

“Family businesses thrive on long-term stability and continuity. In the unfortunate event of a divorce, a nuptial agreement can prevent the family business from becoming a point of contention, which could lead to the business being broken up, sold, or lost. By establishing clear guidelines regarding the transfer of shares, family members can avoid the potential distraction and financial strain that may arise during a divorce.”

CGT changes and the impact on BADR

As of the 6 April 2025, the UK will implement changes to Capital Gains Tax (‘CGT’) rates, particularly affecting Business Asset Disposal Relief (BADR) and Investors’ Relief. The CGT rate for qualifying disposals under those reliefs will increase from the current 10% to 14%. This rate is set to rise further to 18% as of 6 April 2026. In addition to the above, the lifetime limit for qualifying gains under BADR has been reduced to £1 million for disposals made on or after 30 October 2024. These adjustments are part of broader reforms to the UK’s tax system, aiming to increase tax revenues and address economic challenges. The changes are expected to predominantly impact business owners, entrepreneurs and investors leading to higher tax liabilities on qualifying gains.

About Birketts 

Birketts is a full service, UK Top 50 law firm. With a heritage spanning 160 years, we have more than 700 lawyers and legal professionals based in Bristol, Cambridge, Chelmsford, Ipswich, London, Norwich, Sevenoaks. We advise businesses, government and public sector organisations and individuals in the UK and internationally across four principal practice groups: real estate, corporate services, litigation, and private client advisory.