Learn what the future holds for Business Asset Disposal Relief and when to act…
Speculation in recent months had experts believing that Capital Gains Tax (CGT) would likely rise to around 40%, possibly as high as 45% – upon the new Labour government’s first the House of Commons.
Responsible for all economic and financial matters, the Budget speech was delivered by Rachel Reeves, after proudly becoming the UK’s first female Chancellor of the Exchequer since the role was formed in 1221 (yes, you read that right).
Company owners and buyers alike drew a sigh of relief when it was announced that the higher CGT rate will increase from 20% to 24%, and the basic rate from 10% to 18% – effective immediately.
However, CGT is applicable when shareholders profit from selling a company, and even a reasonable rise can cause issues for business owners looking to maximise their exit.
It was also announced that Business Asset Disposal Relief (BADR), which reduces the rate of CGT when disposing of your company or assets, remains intact at 10% until April 2025 when it will rise to 14%, and rise again to 18% in 2026.
The scheme will continue to have a lifetime allowance of £1 million, and you must have owned your company for over two years to be eligible, with Reeves saying the decision had been taken to encourage entrepreneurs to invest in their businesses.
“We need to drive growth, promote entrepreneurship and support wealth creation, while raising the revenue required to fund our public services and restore our public finances,” said Reeves during her Budget speech in the House of Commons.
Significantly, the Chancellor added: “This means the UK will still have the lowest Capital Gains Tax rate of any European G7 economy.” This can be seen as a big win for UK company owners as continued overseas investment is likely to follow.
Whilst the announcement is seen as good news, considering the ramifications of the what-could-have-been forecasts of a CGT rate of 40-45%…a rise is still a rise, and many company owners looking for an exit should take advantage of the 10% BADR rate while they can.
Acting with urgency to sell up can significantly reduce the rate of tax paid on the disposal of qualifying business assets where the disposal proceeds are high enough to take you into the higher tax bands.
One of our experienced transaction leaders can also assist in circumstances where an Employee Ownership Trust is available, which is entirely free from CGT.
To maximise your selling or acquiring opportunities, speak to an expert today. Knightsbridge is a proud member of the K3 Capital Group, giving our clients in-house access K3 Tax Advisory’s vast knowledge, which will prove invaluable following the Budget announcements.