UK employers have reduced annual pay increases and scaled back hiring as the economic slowdown affects the jobs market.

Office for National Statistics (ONS) data for the three months to June shows unemployment increased, though the unemployment rate remained 4.7%,  the highest in four years. Average earnings growth, including bonuses, fell from 5% to 4.6%. Pay growth remained at 5% excluding one-off awards, indicating reduced incentive payments.

Vacancies dropped by 44,000, more than 5% from the previous quarter, marking the 37th consecutive decline. At 718,000, vacancies are now well below pre-pandemic levels. The finance and business services sector, which typically pays higher bonuses, recorded the lowest annual regular pay growth at 3.1%.

The Bank of England has highlighted signs of a cooling labour market and easing pay pressures. However, last week’s quarter-point interest rate cut to 4% is unlikely to be followed by immediate further reductions. Markets expected unemployment and pay growth to ease in line with the ONS figures.

Surveys indicate businesses are holding back on recruitment amid rising employment costs and economic uncertainty. The Chartered Institute of Personnel and Development reported record-low hiring intentions, with young jobseekers hit hardest. Only 57% of private sector employers plan to recruit in the next three months, down from 65% last autumn.

Private sector pay grew 4.8% in the year to June, equivalent to a 0.7% rise after inflation. Public sector pay rose 5.7%, the ONS said.

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Construction output saw its steepest fall since May 2020, according to the latest S&P Global Market Intelligence survey.

The UK construction sector suffered its sharpest downturn since the early days of the Covid pandemic, as housebuilding activity collapsed in July.

The sector’s purchasing managers index (PMI) dropped from 48.8 in June to 44.3 in July, well below the 50.0 mark that separates growth from contraction.

Housebuilding was the biggest drag, with its sub-index falling from 50.7 to 45.3. Civil engineering also recorded a steep fall, while commercial construction slowed modestly.

The data, drawn from around 150 firms, is closely watched by the Treasury and the Bank of England for signs of economic health. It comes amid a grim outlook: unemployment is rising, inflation remains sticky, economic output shrank in April and May, and global trade faces new disruption from Donald Trump’s latest tariffs, which started this week.

The figures raise doubts over Labour’s ambition to deliver 1.5 million new homes by the end of the current Parliament. Industry voices have questioned the target’s realism, pointing to overstated assumptions about building capacity.

While the Government offers £39 billion for social housing and planning reforms to support development, analysts highlight significant obstacles, including labour shortages, inflation, and April’s rise in employer NICs.

Despite these headwinds, ministers are hoping for a rebound. Following the Bank of England’s rate cut to 4%, markets now expect at least one more cut by the end of 2026 – a move that could further alleviate financial pressures on households and businesses.

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When and how to attract outside investors.

External capital can accelerate product development, hiring, international expansion, and mergers and acquisitions (M&A). It can also help you professionalise reporting and governance, supporting sustainable growth. The trade-off is dilution and a closer relationship with investors who will expect evidence-based plans, transparent financials and measurable milestones.

Before you start any process, be clear about: what you need the money for, how much you really need, when you’ll reach break-even (or the next value-step), and what you’re prepared to give up to get there. Investors will ask the same questions. Read our extensive guide, which will help you better understand the process.

What investors look for

Commercial traction and unit economics: Show consistent revenue, gross margin and cash-burn trends, plus the drivers behind them. For subscription or marketplace models, include retention/churn, average revenue per user (ARPU), customer acquisition cost to lifetime value (CAC/LTV), cohort analyses and sales cycle.

A credible plan: Forecasts should tie to hiring plans, capacity constraints and pipeline quality. Your model must reconcile to historical accounts and bank statements.

A clean cap table: Avoid ambiguous share classes, undocumented promises, unpaid share consideration or inappropriate liquidation preferences. Keep option grants recorded and aligned with an agreed pool.

Defensible intellectual property (IP) and contracts: Check assignments from founders/contractors, trade marks, licences, data-processing agreements and any change-of-control clauses.

Good governance: Board minutes, shareholder consents, policies (data protection, information security) and documented controls will all be tested during diligence.

Regulatory awareness: Certain deals in sensitive sectors require notification under the National Security and Investment Act (NSIA). Notifiable acquisitions typically include stakes of 25% or more (or equivalent voting/control thresholds) in 17 specified sectors; completing a notifiable deal without approval can render it void and risk penalties. If you operate in or sell to those sectors, get advice early.

Housekeeping with Companies House: New rules are phasing in identity verification for directors, people with significant control (PSC) and those filing on a company’s behalf. Voluntary verification has been available since April 2025, with mandatory verification beginning on 18 November 2025 with a 12-month transition window for existing directors/PSCs. Make sure your registered email and office address meet current requirements.

The current UK equity market at a glance

Knowing the market helps you set realistic expectations on valuation, timelines and terms.

• UK smaller businesses raised £10.8bn of equity in 2024, down 2.5% on 2023; 2,048 deals completed (-15.1%). Despite softer activity since 2023, 2024 was still the fifth-highest year on record by value.
• Angel investors remain active. HMRC/Enterprise Investment Scheme (EIS) data suggests around £1.6bn of angel-type funding in 2023/24, with a majority of angels investing at an early stage.
• Spinouts were resilient – £1.9bn raised in 2024 (about 17% of total UK equity investment), with an average spinout deal size of £8m.
• The deal mix is changing. The British Business Bank reports larger average round sizes and strong interest in artificial intelligence (AI), where deal sizes were around 40% larger than the market average in 2024.
  

Use this context to frame your plans and timelines when approaching investors.

Is outside capital right for you now?

Ask yourself the following questions.

• Do you have line-of-sight to value creation? Funding should take you to a defined milestone that materially reduces risk (for example, regulatory approval, contracted annual recurring revenue (CARR), first factory line).
• Have you exhausted cheaper capital? Consider grants, revenue-based finance, asset finance or bank debt where cashflows support it.
• Will dilution be worth it? Model ownership after the round and under future dilution scenarios.
• Are there deal-breakers today? Examples include uncertain IP ownership, disputed founder arrangements, missing statutory filings or unresolved HMRC issues.

If the answer to any of these is “not yet”, tackle those items first. It usually shortens fundraising time and improves outcomes.

Types of outside investors (and what they expect)

Friends and family: Fastest to close but treat it professionally: a simple subscription, a clear use of funds and transparent updates.

Angel investors and syndicates: Often experienced operators who can add expertise and networks. Many angels invest using the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS), which can materially improve your close rate if you qualify. Typical expectations: early signs of product-market fit, a clear hiring and go-to-market plan, and timely reporting.

Equity crowdfunding: Useful for B2C brands with engaged communities. Be ready for disclosure, ongoing investor relations at scale and platform diligence.

Venture capital (pre-seed to Series B): Venture capitalists look for fast growth and large addressable markets. They negotiate preference shares, investor rights and board seats. They examine unit economics closely and expect monthly reporting.

Growth equity/minority private equity: Targets proven commercial traction and a clear path to profitability. Expect comprehensive due diligence and more robust minority protections.

Corporate/strategic investors: Can add distribution, credibility and technical collaboration. Balance strategic value against potential conflicts, such as customer exclusivity.

Family offices: Increasingly active; may offer flexible terms and longer hold periods, but diligence standards vary — confirm decision processes and timelines.

Investor incentives you can use

SEIS and EIS are two HMRC-backed schemes that can improve investor returns and make a round easier to close if your company and the investor meet the conditions.

Seed Enterprise Investment Scheme

• For investors: Income tax relief at 50% on investments up to £200,000 per tax year; partial capital gains tax (CGT) reinvestment relief is also available.
• For companies: Can raise up to £250,000 under SEIS, subject to age, asset and trading-status limits.
  

Enterprise Investment Scheme

• For investors: Income tax relief at 30% on up to £1m a year (up to £2m if at least £1m is invested in knowledge-intensive companies), with CGT advantages on exit.
• For companies: Can raise up to £5m per year and £12m lifetime across EIS and other venture capital schemes (higher limits apply for knowledge-intensive companies).

Certainty of availability: The government has legislated to extend EIS and venture capital trust (VCT) income tax reliefs to 6 April 2035, giving long-term policy certainty.

Advance assurance and advanced subscription agreements: Many investors will ask for HMRC advance assurance. If you use an advanced subscription agreement (ASA, also known as SAFE notes), to take funds before a priced round, ensure the ASA is equity-only (no refund or interest). For SEIS or EIS advance assurance, HMRC expects a long-stop of no more than six months; in later compliance reviews, HMRC has indicated that a longer long-stop won’t automatically prevent relief if the ASA remains equity-like (no interest, no redemption and genuine subscription for shares).

Practical tip: Build time for the advance assurance process. It’s not mandatory, but it can shorten investor invested capital cycles.

Instruments and terms: Getting the structure right

New ordinary or preference shares (priced round) are common for VC and growth equity. Key points you will negotiate include:

• Valuation and option pool: Pools are typically created or “topped up” pre-money; model post-money ownership for each scenario.
• Investor rights: Reserved matters, information rights and board representation.
• Liquidation preference: A standard term is 1x non-participating; multiples and participating features increase investor downside protection and your dilution in a downside exit.
• Anti-dilution: Weighted-average is more typical than full-ratchet in the UK; be clear how it interacts with future rounds.
• Pre-emption, tag/drag-along: Make sure these align with your growth and exit plans.
• Convertible instruments: In the UK, ASAs are widely used to bridge to a priced round. Convertible loan notes are also used but usually do not qualify for EIS/SEIS because they are debt. If investor tax relief is essential, structure carefully and take advice.
• Secondary sales: Selling existing founder or early investor shares can help rebalance risk. Plan early for any stamp duty or stamp duty reserve tax on transfers (not applicable to new share issues), and consider the optics with incoming investors.

Employee options and your option pool

A well-designed option plan helps you hire and retain key people and is expected by most institutional investors.

• The Enterprise Management Incentives (EMI) scheme offers significant tax advantages if you qualify. As a guide, a company must have gross assets of £30m or less and fewer than 250 employees; an individual employee may not hold unexercised EMI options over shares worth more than £250,000 at grant value.
• Across the company, unexercised EMI options over shares (by unrestricted market value at grant) must not exceed £3m at any time.

Investors will expect to see how the pool supports your hiring plan; factor pool size into your pre-money valuation discussions.

Due diligence: What to prepare

Financials and tax

• Statutory accounts and management accounts with reconciliations to trial balance and bank.
• 12-24 month forecast model plus scenarios.
• VAT, PAYE, corporation tax filings and time to pay (if any).
• Research and development (R&D) tax relief – from accounting periods beginning on or after 1 April 2024, most companies claim under the merged R&D scheme (an R&D expenditure credit style credit). A separate enhanced R&D-intensive support remains for loss-making small and medium-sized enterprises (SMEs) with R&D intensity of at least 30%, with a one-year grace period if you dip below after qualifying. Expect close scrutiny of claims and compliance.
  

Legal

• Shareholder agreements, articles, option scheme rules, IP assignments, key contracts, data-processing agreements.
• NSIA analysis if relevant (see earlier section).
  

People and operations

• Employment contracts, contractor agreements, right to work (RTW) checks and any IR35 assessments.
• Policies and controls (for example, information security if selling into enterprise or public sector).

Corporate records

• Up-to-date cap table and Companies House filings. Prepare for upcoming identity verification requirements and keep your registered email and address compliant.
  

Create a simple virtual data room. Label documents clearly and keep a single source of truth for the capitalisation table.

Valuation: How investors will think about it

Valuation is a function of stage, growth, margins, capital efficiency, market scale and comparable transactions. Early rounds may reference market ranges for your sector and stage; later rounds will look more like a blend of revenue multiples, gross-margin-adjusted metrics, and discounted cash flows (where appropriate). Build sensitivity tables in your model so you see how valuation and dilution respond to different growth and burn scenarios.

If you want HMRC to assess share valuations for employee options (EMI), you can agree an advance valuation with HMRC. This is separate from investor pricing and can help with staff communications.

Typical process and timeline

1. Preparation (4-8 weeks): Business plan and model, data room, cap table, SEIS/EIS advance assurance (if using), shortlist of investors.
2. Outreach (4-8 weeks): Intro calls and light diligence; update your model and deck based on feedback.
3. Term sheet (2-4 weeks): Negotiate valuation, pool, and key terms; exclusivity may start here.
4. Full diligence and legals (4-8 weeks): Financial, tax, legal and commercial diligence; long-form documents; regulatory approvals as needed (for example, NSIA).
5. Completion and post-close: File share allotments, update PSC register and confirmation statement, issue option grants, and implement reporting cadence.

Timelines vary by stage and deal type; having a prepared data room is the simplest way to shorten them.

Investor communications and reporting

• During the raise: Set a cadence for updates, highlight milestones and be clear about the runway.
• After completion: Agree on reporting (monthly or quarterly), key performance indicators, board meeting dates and information rights.
• When things change: Update investors early — most will help if they understand the problem and the plan.

How accountants can support you when scaling your business

We can review your plans with an investment lens, including:

• investment-readiness review (financials, tax, governance and data-room checks)
• forecast modelling and scenario analysis
• SEIS/EIS advance assurance and post-investment compliance
• EMI option scheme design and HMRC valuations
• transaction support (financial and tax due diligence) and post-completion integration
• NSIA signposting where relevant.
  

Closing thoughts

This guide sets out the practical steps to raise outside capital, with 2025/26 tax year rules and current market data. Every situation is different — please speak to us before you take decisions that affect valuation, tax or control. We can help you plan the process, identify the right investor types, set realistic terms and complete efficiently.

If you’d like a short investment-readiness review or a second opinion on term sheets, let us know. We’ll respond with a suggested scope and timeline.

Tips for a balanced investment approach.

Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions.

The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice.

Start with a clear plan

Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities.

Set your risk level in advance: Ask yourself two questions.

• Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)?
• Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn.

Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills.

Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk.

Diversification: Spread risk across assets, regions and issuers

Diversification reduces the impact of any single holding. Practical ways to diversify include the following.

• Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash).
• Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk.
• Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure.
• Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk.

A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole.

Use tax wrappers to reduce avoidable tax and trading frictions

Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax.

ISAs (individual savings accounts)

• Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000.
• Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged).
  

ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost.

Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know.

Pensions (workplace pension, personal pension/SIPP)

• Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible.
• Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26).
• Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income).
• Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100.
  

Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension.

Personal savings: Interest allowances

• Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA.
• Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band).
  

Dividends and capital gains outside ISAs/pensions

• Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively.
• The annual capital gains tax (CGT) exempt amount, £3,000 for individuals (£1,500 for most trusts).
• CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26.
  

CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July).

Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable.

Bonds and cash: Interest-rate and inflation considerations

Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon.

Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve.

Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation.

Control costs and product risk

Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses.

Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core.

Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news.

Rebalancing: Why, when and how

Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended.

Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs)

• Frequency: Review at least annually.
• Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative).
• Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances.
  

Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order.

Safeguard cash and investments with the right protections

FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing).

FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls.

Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date.

Currency risk: When to hedge

For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds.

Behavioural risks: Keep decisions steady

Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include:

• automate contributions (regular monthly investing), which spreads entry points
• write down rules (what you will do if markets fall 10%, 20%, 30%)
• separate spending cash from investments so you do not sell at weak prices to fund short-term needs
• use portfolio “buckets” in retirement.

Retirement planning: Sequence-of-returns risk and withdrawals

If you are drawing an income from investments consider the following.

• Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls.
• Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer.
• Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them.
  

Putting it together: A repeatable checklist

1. Confirm goals and time horizons.
2. Check emergency cash (3-6 months).
3. Map your target asset allocation.
4. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate.
5. Keep costs low: Prefer broad index funds/ETFs.
6. Set rebalancing rules: Annual review + thresholds.
7. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant.
8. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025.
9. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes.

When to get in touch

Get in touch if:

• you are unsure how to set or maintain an asset allocation
• you plan to draw income and want to coordinate wrappers and tax bands
• you expect large one-off gains or dividends and want to plan disposals or contributions
• you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently
• you are considering more complex investments.

Wrapping up

Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational.

Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades.

If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most.

Important information

This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser.

If you’d like advice on managing your portfolio, get in touch.

HMRC has launched a letter campaign for companies that may have miscalculated corporation tax marginal relief on their returns.

Any business receiving a letter must reply within 30 days, even if it believes its return is correct. Ignoring the letter could lead to a compliance check and potential penalties.

The campaign focuses on companies with ‘associated companies’, where ownership or control links reduce the profit limits for claiming marginal relief. HMRC’s letter states: “We have information that shows your company has associated companies, but hasn’t declared them when claiming marginal relief. Having associated companies reduces the taxable profit limits for claiming marginal relief. This means your company may owe more corporation tax.”

Marginal relief applies to taxable profits between £50,000 and £250,000. Since April 2023, earnings above £250,000 have been taxed at 25%, those below £50,000 at 19%, with marginal relief easing the transition between the two rates. The £50,000 and £250,000 thresholds must be divided proportionately where associated companies exist.

Businesses should review all corporation tax returns for periods including and following 1 April 2023. If a return is incorrect and within 12 months of the statutory filing date, it should be amended online. Where the error falls outside this window, HMRC advises making a voluntary disclosure.

Letters will continue to be issued until October 2025, so affected companies are strongly advised to speak with a qualified tax adviser or accountant to ensure all filings are accurate.

Talk to us about your finances.

How to ensure financial success

Selling or passing on your business is one of the biggest financial events you will ever face. The decision to step away from a company you have built carries significant cash, tax and lifestyle consequences. With the right groundwork, you can structure the deal to meet your goals, move funds into vehicles that match your risk appetite and leave enough liquidity for life after work.

Early preparation also gives you time to resolve any compliance issues, strengthen your accounts and present a track record that attracts the highest possible price. By modelling different deal options now, you can see how each one affects your net proceeds, pension limits and inheritance-tax position. Planning ahead lets you use reliefs that are still available – such as business asset disposal relief and the frozen income tax thresholds – before any future Budget changes them. It also allows your family to understand the financial shape of the transaction and to update wills, trusts and insurance where needed.

This guide explains the practical steps to follow, from setting objectives to investing the proceeds, and highlights the tax rates, allowances and valuation trends that apply in the 2025/26 UK tax year. We hope it gives you a clear starting point and prompts the conversations that will lead to a smooth, profitable exit.

Set clear objectives long before you market the company

Most owners think first about headline price, but three other factors deserve equal weight.

1. Deal structure: Will you accept staged payments, an earn-out or a loan-note element? Earn-outs featured in more than 60% of UK small or medium-sized enterprise (SME) transactions reported by BDO during 2024, mainly to bridge price expectations in a volatile market. Staged payments shift risk: you may pay less tax up front, but you rely on the buyer’s future performance.
2. Post-sale income: Draw up a personal cashflow forecast that covers at least 20 years. Include inflation and remember that the full new state pension is £230.25 a week in 2025/26.
3. Legacy: Decide whether you want the business to remain independent, merge with a larger group or become employee-owned. More than 2,250 UK companies are now employee-owned, up from fewer than 150 in 2014, showing the model’s growing appeal.

Putting these goals on paper early gives your advisers a clear brief and avoids late-stage disagreements among shareholders.

Understand how buyers will value you

Private-company acquirers usually apply an earnings multiple – most often applied to EBITDA (earnings before interest, taxes, depreciation and amortisation) – adjusted for non-recurring items. The median EBITDA multiple for UK SMEs rose to 5.4 × in 2024, up from 5.0 × the year before, reflecting stronger buyer confidence. A robust valuation exercise should:

• normalise earnings (for example, remove one-off Covid grants or founder salaries above market rate)
• highlight growth drivers, such as recurring revenue or protected intellectual property
• benchmark the resulting profit against sector peers so that buyers focus on performance, not perception.

In certain instances where EBITDA is not deemed the most appropriate metric, turnover or discounted future cashflows may instead be used.

Put your records in order and pre-empt due diligence questions

Buyers usually ask for five years of data. Common stumbling blocks include deferred VAT, undocumented research and development (R&D) claims and missing employment contracts. Tackling these in advance avoids price chips later and signals professionalism.

A written “data-room index” that lists every file, folder and version helps keep the sales process on track and reduces professional-fee overruns.

Know your personal tax bands and allowances for 2025/26

Note: Different figures apply for Scotland.

All thresholds are frozen until at least April 2026, which means fiscal drag is pushing more income into the 40% and 45% bands each year. If you expect part of the sale consideration to be paid across two tax years, you may be able to use two sets of allowances.

Capital gains tax on a share sale

From 6 April 2025 the CGT rates on most assets are 18% within the basic-rate band and 24% above it. Residential property sales attract the same rates.

Business asset disposal relief (BADR)

• Lifetime limit: £1m
• Rate: 14% for disposals on or after 6 April 2025
• Qualifying period: two years of 5% shareholding and voting rights.

If you expect to make several qualifying disposals, consider whether accelerating one or more completions before 6 April 2026 could save tax. Gains that complete up to 5 April 2026 are taxed at 14%; from 6 April 2026 the Business Asset Disposal Relief rate on qualifying gains within your £1 million lifetime allowance is scheduled to rise from 14% to 18%. Gains that exceed the £1 million limit will instead be taxed at the standard CGT rates (currently 18%/24%). If you expect to realise more than £1 million of qualifying gains, consider whether accelerating part of the sale before 6 April 2026 could reduce the tax on the first £1 million.

Corporation tax steps before you advertise the sale

The main corporation tax rate is 25% for profits above £250,000. Companies with profits of £50,000 or less still pay 19%, with marginal relief in between. Practical ways to reduce the effective rate include the following.

• Full expensing: A £500,000 qualifying plant purchase made now saves £125,000 in tax at 25%. The cash benefit shows up in headline EBITDA and, by extension, in the deal multiple.
• Pension contributions: Company payments cut profits and are exempt from employer national insurance contributions (NICs). A £60,000 contribution costs the company £45,000 net after tax, but credits your pension with the full amount.

Watch associated-company rules if you have more than one trading or property subsidiary; grouped profits can push you into the 25% bracket earlier than expected.

Optimise remuneration and pensions in the past two trading years

• Annual allowance: The allowance is £60,000. A taper starts at adjusted income of £260,000 and can reduce the allowance to £10,000.
• Lump-sum allowance: You can normally take up to £268,275 tax free after the lifetime allowance was abolished in April 2024.

Bonus or dividend?

The more tax-efficient route depends on your exact circumstances:

• Corporation tax rate: A bonus reduces taxable profits, saving corporation tax at up to 25% – but it also incurs employer National Insurance at 15%.
• Personal tax band: Above the £50,270 upper-earnings limit, employee NIC falls to 2%; below it, the 8% rate often tips the balance in favour of dividends.
• Dividend allowance: The first £500 of dividends in 2025/26 is tax-free, slightly improving the dividend outcome.
• Cashflow needs and pension strategy: Salary can be sacrificed into pensions NIC-free; dividends cannot.

Consider a holding company or a family investment company

A UK holding company can receive the sale proceeds free of CGT under the substantial shareholding exemption if it has held at least 10% of the trading subsidiary for one year. You then control the pace at which cash comes out – either as dividends over several years or as a capital reduction subject to CGT at your marginal rate. The structure is also helpful if you want to reinvest part of the proceeds in a new venture without paying tax twice.

A family investment company (FIC) lets you:

• gift non-voting shares to adult children while keeping control of voting shares
• ring-fence growth outside your estate for inheritance tax (IHT)
• pool family wealth in a single, professionally managed portfolio.

IHT after the sale

Business property relief (BPR) at 100% applies to shares in an unquoted trading company held for two years, but it falls away once you hold cash. To reinstate protection you can:

• buy AIM shares that qualify for BPR (higher risk)
• invest in enterprise investment scheme (EIS) shares or a venture capital trust (VCT)
• settle cash into a discretionary trust and survive seven years.

The Autumn Budget 2024 confirmed that from 6 April 2026 the 100% rate of BPR will be limited to the first £1m of combined business and agricultural property. Anything above that limit will qualify for relief at 50%. If your estate includes trading shares or other qualifying assets worth more than £1m, consider completing transfers or restructuring before 5 April 2026 while full relief is still available.

Manage the proceeds safely and efficiently

1. Bank security: The Financial Services Compensation Scheme covers £85,000 per person per banking licence. Split large balances across several institutions and consider National Savings & Investments for further protection.
2. Quick diversification: Move surplus cash into short-dated gilt funds or Treasury bills while you design a long-term portfolio. Gains on gilts are CGT-free for individuals.
3. Tax shelters: Fund ISAs (£20,000 each per tax year) and top up pensions if you still have annual allowance space.

Keep an eye on market activity

• The Office for National Statistics recorded 316,000 business births and 309,000 deaths in 2023, the slowest net creation since 2010.
• Buy-side appetite remains strong for established, profitable firms, reflected in the 5.4 × median EBITDA multiple noted earlier.

Fewer startups and the higher cost of new debt mean strategic buyers often prefer to acquire rather than build, which supports pricing for well-run companies.

Exit timetable: Suggested milestones

Next steps

An exit is not just a transaction; it is the point at which years of effort turn into capital that must support the next stage of your life. By starting the process two to three years out, you give yourself time to optimise tax reliefs, improve valuation metrics and build a post-sale investment plan that matches your goals. If you are even thinking about a sale within that horizon, please contact us for an exit-readiness review. We will map out key dates and make sure every pound of value ends up where you want it – working for you and the people who matter to you.

Contact us for help securing a straightforward sale and a strong financial future.

Effective hedging strategies

Inflation may have retreated from the double-digit heights of 2022, but at 3.4% on the CPI measure for May 2025 it still erodes the real value of every pound you hold. Put another way, if prices keep rising at the current pace, an item that costs £1,000 today will set you back about £1,034 this time next year. That silent loss affects personal savings, business reserves and long-term plans alike.

As your accountants, our job is to help you keep more of what you earn and to deploy cash and investments where they work hardest. The good news is that the UK tax code still provides several shelters – ISAs, pensions and targeted allowances – capable of outpacing inflation when used thoughtfully. Add a disciplined approach to cash management and a measured mix of inflation-linked or real-asset investments, and you can preserve, and even grow, purchasing power despite the current backdrop.

This guide sets out practical, tax-year-specific steps so you can act with confidence.

Know the numbers that affect you

Inflation reduces spending power, but tax reliefs can offset a large part of the damage when you use them fully. The table below lists the allowances most readers rely on. We have added two that seldom appear in headline summaries – the personal savings allowance and the marriage allowance – because both can make a material difference to net returns at current interest-rate levels.

How the allowances interact

A higher-rate taxpayer with spare cash might:

1. use their own ISA for equity trackers (capital growth sheltered). To help an adult child with their first-home deposit, gift cash into a Lifetime ISA opened in the child’s own name – only the account holder can use the 25% bonus at purchase.
2. fund a pension up to the £60,000 limit, gaining 40% relief today and tax-free growth thereafter
3. keep the family’s rainy-day cash efficient. Place deposits in the lower-earning (basic-rate) spouse’s name first to use their £1,000 Personal Savings Allowance. After that, hold up to £500-worth of annual interest in the higher-rate taxpayer’s own name to use their £500 allowance. Any surplus beyond those limits can then move into ISAs or joint accounts to avoid taxable interest altogether. (Note: additional-rate taxpayers have no Personal Savings Allowance, so all interest in their name is taxable).
4. realise £3,000 of gains each year to bed-and-ISA shares, resetting the capital gains tax (CGT) base cost without paying tax.

Taken together, those moves put £84,260 under shelter before a single pound of normal taxable investing begins.

Make every tax wrapper work harder

ISAs – front-load where possible

Funding the ISA in April rather than March adds 11 months of tax-free growth. At a 4.5% return that timing difference alone is worth about £825 over five years on the maximum £20,000 allowance. Stocks & shares ISAs remain the long-term growth engine, but cash ISAs still suit the following.

• Short-term targets: A wedding deposit or school fees due inside three years.
• Risk-averse clients: Who would otherwise breach the savings allowance and face tax on interest.

Beware a policy change: media reports suggest ministers are considering capping the cash component of the ISA to £4,000, although no draft legislation yet exists. Monitoring the Autumn Statement will be essential.

Pensions – relief now, inflation-proof income later

Every employee can ask their employer to pay a personal contribution via salary sacrifice. Doing so saves both employee and (usually) employer national insurance (NI); many firms share part of their NI saving, boosting the total invested.

Carry-forward offers a second lever. If you paid only £25,000 into your pension in each of the last three tax years, you have £85,000 of unused relief; add the current £60,000 allowance and, assuming sufficient earnings and no tapering, you could invest up to £145,000 in 2025/26 without breaching the annual allowance rules. That lump sum shelters far more from inflation-driven tax drag than drip-feeding alone.

Lifetime allowance replacement

Since April 2024 the lifetime allowance has been abolished and replaced by two lump-sum limits. That reform removes the fear of an unexpected 55% charge for many savers, so clients who froze contributions earlier can reconsider. We recommend a review for anyone whose fund sat near £1m in 2023/24.

Keep cash competitive

High-street current accounts still pay close to zero, but competition among challenger banks has raised top easy-access rates to 5% AER (Chase saver with boosted rate). Several other providers pay 4.4-4.8%. If you prefer the security of Treasury backing, NS&I’s products remain solid, though the Premium Bond prize-fund rate will trim to 3.60% from August 2025.

A simple three-bucket model works.

1. Immediate access (1-3 months of spending) – keep this in the highest-paying easy-access or current account.
2. Known outgoings (3-12 months) – ladder one-year fixed bonds. The best Moneyfacts-listed bonds pay 4.5-4.6% today.
3. Reserve (1-5 years) – use British Savings Bonds (three-year term now 3.84% AER) or a gilt-backed money-market fund yielding around 4.4%.

Tip for business owners: Corporate treasury portals such as Flagstone and Insignis let limited companies spread deposits across many banks while keeping within the £85,000 FSCS cap.

Add inflation-linked assets

Index-linked gilts

The Debt Management Office issues gilts indexed to the Consumer Prices Index (CPI). Both coupon and principal adjust, so although the running yield is low (-0.3% real on a 2037 linker at the time of writing), the bonds guarantee purchasing-power preservation if held to maturity.

Investors often prefer funds or exchange-traded funds (ETFs) because they:

• remove single-bond risk
• simplify reinvestment of accrued indexation
• qualify for bond-fund exemptions on capital distributions, reducing paperwork outside wrappers.

Remember, indexation lag means gilt cashflows reflect CPI eight months earlier, not the month of payment.

Inflation-linked corporate bonds

National Grid, Network Rail and major utilities have issued bonds linked to the retail prices index (RPI). When held through an inflation-linked corporate bond fund they can improve yield by 0.5-0.8 percentage points versus gilts, but credit risk rises, so keep exposure modest (perhaps 10% of a fixed-income sleeve).

NS&I index-linked savings certificates

These are still the “holy grail” for long-term cash savers thanks to tax-free, RPI-linked returns. No new issues have appeared since 2011, but do not cash in old tranches unless an urgent need arises – any comparable product today sits well below them.

Equities: The long-run inflation hedge

Stocks have beaten UK inflation in 17 of the last 20 rolling 10-year periods. A widely used global all-cap tracker delivered an annualised 6% dividend growth over the past decade, according to MSCI data.

Constructing a resilient share portfolio

Investors who dislike day-to-day volatility can split the equity sleeve between accumulation (reinvested dividends) and income share classes. Reinvested income historically accounts for more than half the FTSE 100’s total return.

Real assets: Property, infrastructure and commodities

Property

Despite higher mortgage costs, the UK House Price Index shows average prices 5.3% higher in the year to April 2025. Direct buy-to-let now faces:

• 20% limit on finance-cost relief
• additional 5% stamp duty surcharge
• Making Tax Digital quarterly reporting from April 2026.

Shares in a real estate investment trust side-step all three and can sit in an ISA. Look for funds with low loan-to-value ratios and inflation-linked commercial leases.

Infrastructure

Many listed infrastructure trusts own roads, schools or renewable-energy assets on government-style concession agreements that uplift revenue each year by CPI or RPI. Discount volatility has widened – some trade 15% below net asset value – offering a margin of safety to income seekers.

Commodities

Broad-basket exchange-traded commodities give exposure to energy, metals and agriculture in one line. Commodities can spike when inflation shocks appear, but they do not produce cashflow, so keep to a single-digit percentage allocation and rebalance annually.

Business owners: Preserve corporate cash and profits

• Shop for better deposit rates: Specialist business accounts now pay up to 4.8% on 95-day notice.
• Consider treasury funds: Short-dated gilt and T-bill money-market funds usually qualify as “cash equivalent” on the balance sheet, providing daily liquidity.
• Use pension contributions tactically: An employer pension contribution is fully deductible, so it saves corporation tax at the company’s rate – 19% on profits up to £50,000, 26.5% on profits between £50,000 and £250,000, and 25% above £250,000 – plus employer National Insurance.
• Salary-dividend mix: Once the £500 dividend allowance is used, compare the net benefit of extra dividends with company-paid pension or a modest salary that triggers NI credits for state pension entitlement.

According to the British Chambers of Commerce Q2 2025 survey, 52% of small and medium-sized enterprises (SMEs) still list inflation as a top concern, confirming that cash-management advice remains highly valued.

Review borrowing strategy

With the Bank Rate currently at 4.25% (as of July 2025), typical five-year fixed residential mortgages hover around 5%. Before fixing, do the following.

• Check early-repayment charges – some lenders cap them at 3% in year two, giving flexibility if rates fall.
• Stress-test affordability at +3% to protect future cashflow.
• Line up overpayment capacity: paying down a 6% unsecured loan is an after-tax “return” that beats many investments.

Keep your plan on track

1. Automate contributions: Standing orders into ISAs or pensions turn saving into a monthly bill you pay yourself first.
2. Calendar key dates: Dividend and CGT allowances reset on 6 April; interest on bank accounts may be paid gross at tax year-end.
3. Rebalance with discipline: Set a ±5% band around target weights. When equities rally, trim back; when they fall, top up using cash or bond proceeds.
4. Harvest taxable losses: A quick “bed-and-breakfast” sale cannot repurchase the identical holding within 30 days, but buying a similar ETF keeps exposure while resetting the base cost.
5. Document decisions: A simple spreadsheet noting date, trade, rationale and after-tax return helps if HMRC queries share identification rules and also reinforces good habits.

Final thoughts

Inflation of 3-4% may feel modest beside the price spikes of recent memory, yet over a decade it halves purchasing power if left unchecked. By filling tax-efficient wrappers early, shopping around for competitive savings rates, adding assets with explicit or implicit inflation linkage, and weighing the cost of borrowing against secure debt-repayment “returns”, you can keep the real value of your wealth intact.

The allowances outlined – £20,000 for ISAs, £60,000 for pensions, £500 for dividends and £3,000 for capital gains – form the backbone of an effective hedge. Layered on top, a sensible asset mix and periodic rebalancing provide both resilience and growth potential.

Contact us for personalised projections, a review of your current allocations or guidance before making major contributions or disposals.

Energy bills are falling for around 21 million households in England, Scotland and Wales, with typical household bills down £11 a month.

Energy bills are falling for around 21 million households in England, Scotland and Wales. Regulator Ofgem has lowered the price cap, cutting the typical dual-fuel bill by 7%, or £11 a month. This brings the average annual bill for a household using a standard amount of gas and electricity to £1,720.

However, this drop comes with caution. With colder, darker months ahead, households still face the risk of higher winter bills. Ofgem and energy analysts encourage people to consider fixed tariffs, which can provide payment certainty and save around £200 a year.

Currently, 35% of households are on fixed deals – up from 15% a year ago – but these only lock in the unit rate. Actual bills still depend on how much energy you use.

Under the new cap, gas prices fall from 6.99p to 6.33p per kilowatt hour (kWh), and electricity from 27.03p to 25.73p. Daily standing charges have also dropped slightly, averaging 51.37p for electricity and 29.82p for gas.

The price cap doesn’t apply in Northern Ireland, which has a separate energy market. Customers on pre-payment meters will now pay a typical annual bill of £1,672, while those paying by cash or cheque face £1,855.

Although another small drop is forecast for October, energy consultancy Cornwall Insight warns of “significant uncertainty”, particularly with global pressures affecting wholesale prices. Ofgem is currently reviewing standing charges, which continue to spark debate.

Talk to us about your finances.

Bank of England governor Andrew Bailey has warned that the UK jobs market is showing signs of slowing as employers react to higher national insurance contributions (NICs).

Speaking at a London British Chambers of Commerce event, Bailey said businesses are beginning to scale back hiring and curb pay rises in response to the increased costs.

The Bank’s Monetary Policy Committee (MPC) will consider the impact of lower employment and weaker wage growth when it meets in August to decide on the interest rate, which currently stands at 4.25%. Bailey, who voted to hold rates steady earlier this month, said he had seen “a bit more evidence” of employers adjusting pay and staffing levels following NIC changes in the last budget.

Recent data highlights a fragile economy. GDP grew by 0.7% in the first quarter but fell by 0.3% in April. PAYE figures show more than 100,000 jobs were lost in May – the largest monthly decline since the first COVID lockdown in 2020.

Private sector wage growth has also eased, falling to 5.1% in the three months to April, down from 5.9% earlier in the year. A split vote at the Bank’s June meeting – with three members backing a cut to 4% – suggests growing momentum for a rate reduction. Markets now expect rates to fall to 3.75% by the end of the year.

Bailey concluded that underlying economic growth remains weak and will likely stay subdued as firms face global uncertainty, including US trade measures.

Get in touch to discuss your business.

Under a proposed change to UK employment law, employers will no longer be allowed to use non-disclosure agreements (NDAs) to prevent workers from speaking out about sexual misconduct or discrimination in the workplace.

An amendment to the Employment Rights Bill would render confidentiality clauses void if they attempt to stop individuals from disclosing allegations of harassment or discrimination. The Government says the measure is designed to protect victims and ensure workplace cultures do not allow serious misconduct to be hidden.

NDAs are legally binding agreements used to protect confidential information between two parties. While they can serve legitimate purposes – such as protecting intellectual property or sensitive business data – they have increasingly been used to suppress reports of inappropriate behaviour, particularly in employment disputes.

The proposed reform follows similar legal changes in countries including Ireland, the United States, and parts of Canada. Those jurisdictions already prevent NDAs from being used to silence victims of sexual harassment or discrimination.

The amendment will be debated in the House of Lords on 14 July. If peers approve, the Bill will return to the House of Commons for final approval before becoming law later this year.

The Government says the change strikes a balance between legitimate confidentiality and protecting individuals’ rights to speak out about unacceptable treatment. It is expected to offer greater protection and transparency for workers while encouraging more open and accountable workplace cultures.

Discuss your employment challenges with us..