Selling Your Business to Retire? Get This Tax Relief!
“A small business is an amazing way to serve and leave an impact on the world you live in.” (Nicole Snow)
Small business owners looking to sell their business or interest in a business as part of their retirement planning will be glad to know that meaningful tax relief has been provided for them in the 2026 National Budget.
Among other measures to support businesses, National Treasury raised the capital gains tax exemption for the sale of a small business for older persons (55+) from R1.8 million to R2.7 million, a long-overdue adjustment for inflation and rising asset values.
The higher exemption also applies to more businesses than it did before. Where small businesses used to be defined as those valued at R10 million or less, the limit has been increased to R15 million.
Do I qualify?
First check if you meet the bare minimum requirements:
- The exemption applies to individuals aged 55 or older.
- The exemption applies when disposing of a small business with a market value not exceeding R15 million.
- The market value of all assets, regardless of their nature, must be considered in determining whether the R15 million threshold is exceeded or not.
- Liabilities of the business are ignored for this determination.
- For partnerships or companies, the R15 million threshold applies to the total assets of the business, not each partner or shareholder’s fractional interest. This means a two-partner business with R20 million in assets will not qualify, even if each partner’s share is only R10 million.
- The lifetime CGT exemption is capped at R2.7 million in total across all disposals.
- Each asset must have been held continuously for at least 5 years prior to disposal and the individual that qualifies for the relief had been substantially involved in the operations of the business of that small business during this period.
- The relief must be determined on an asset-by-asset basis.
Given the complexity of this determination and SARS’ requirement that relief must be determined on an asset-by-asset basis, professional tax assistance is highly recommended.
How could it benefit you?
Many small business owners rely on the eventual sale of their business as their primary retirement asset.
This tax relief can support succession planning, intergenerational transfers, and smart business exits, particularly for family-owned businesses. It encourages the sale of businesses, effectively unlocking capital and allowing for business continuity or reinvestment into the economy.
Of course, the additional tax-free capital gain will also meaningfully boost your retirement security after years of building a business.
If you’re considering retiring or selling soon, it’s worth reviewing your timing with a tax advisor. We can assist you in reviewing your business valuation, assessing your CGT exposure and structure and timing your exit correctly to make the most of this meaningful tax exemption.
The 40% Rule: Do You Have Too Many Eggs in One Basket?
“Don’t put all your eggs in one basket.” (Idiom)
Most founders track revenue growth. Fewer track where that revenue comes from. Client concentration risk arises when a single customer, or a small cluster of customers, accounts for a disproportionate share of revenue. In some industries it can be natural to have larger customers, especially in business-to-business markets with long-term contracts. But as dependency grows, revenue becomes fragile in ways that aren’t obvious from top-line growth figures.
Having many of your eggs in one basket exposes you to sudden revenue shocks if a key client reduces orders, delays payment, or – horror of horrors – ends the relationship. The “40% Rule” is a practical red flag used by bankers, acquirers, and investors: if a small group of clients contribute 40% or more of total revenue, the business carries material concentration risk.
This article unpacks why 40% matters, how it influences due diligence, and what business owners can do to reduce exposure without destabilising current income.
Why the 40% threshold matters
The “40% Rule” is not an ironclad regulation, but a pragmatic benchmark widely used in finance, banking, and valuation circles. When one or two clients account for around 40% or more of revenue, credit committees, acquirers, and investors often treat it as a material concentration risk. Above this level, the loss of a single account can eliminate a large portion of expected cash flow, put pressure on fixed costs, and lead to breaches of debt covenants.
If you pass the 40% mark, lenders may become cautious or impose stricter terms on financing. This makes sense, as your ability to pay them back is contingent on a relationship they cannot control.
How concentration risk affects business finances
The financial impact of client concentration extends beyond headline revenue figures. Concentrated revenue makes cash flow volatile and forecasting uncertain. One delayed payment or unexpected order reduction from a large client can create immediate cash flow problems, especially where fixed costs such as payroll and rent are significant. Beyond the risk issues, a dominant client can also gain leverage in pricing and contract negotiations, which can erode margins quietly over time.
The strategic and operational side of concentration
This risk can go beyond the pure financials. When one client drives a large share of revenue, internal and external decisions can begin to revolve around that relationship. Product development may align too closely with the needs of your largest client, diverting focus from broader market requirements. Marketing and sales efforts can end up prioritising retention of that client at the expense of diversifying the portfolio.
Market valuation and exit implications
For owners considering a sale or seeking external capital, client concentration can have a significant effect on valuation. Buyers and investors seek predictable, diversified revenue streams. A company with a single client contributing a large share of its revenue is often seen as riskier.
The 40% threshold often becomes a pivot point in negotiations. Buyers may discount offers or tie price adjustments to post-acquisition retention of key clients. Similarly, lenders pricing credit facilities take concentration into account. Companies with high concentration may face higher interest rates, tighter covenants, or requirements for collateral. In extreme cases, banks may refuse financing until concentration metrics improve.
Managing and reducing concentration risk
Addressing concentration risk starts with measurement. Your accountant can help you calculate the percentage of revenue each client contributes, as well as the combined share of the top five clients. Monitoring trends over multiple quarters helps identify whether concentration is rising as a natural business outcome or creeping up unnoticed.
Strategic actions to reduce concentration are most effective when pursued deliberately and gradually. This could involve targeted business development efforts to land new clients, segment diversification to broaden revenue sources, or pricing strategies that balance revenue concentration without sacrificing profitability. Diversification need not diminish the value of large clients. It’s about strengthening the overall revenue base so that losing any one account does not destabilise the organisation.
Final thoughts
Client concentration risk is a silent strategic threat that often hides behind strong revenue figures. Reaching the 40% threshold can transform a seemingly healthy business into one that is vulnerable to external decisions and internal inertia.
Your Tax Deadlines for April 2026
- 01 April: Start of the 2026/27 Financial Year
- 07 April: PAYE submissions and payments
- 24 April: VAT manual submissions and payments
- 29 April: Excise duty payments
- 30 April:
- VAT electronic submissions and payments
- CIT Provisional Tax payments where applicable.
