Business owners considering selling their companies are being urged to accelerate their plans in a bid to avoid cuts in tax relief.
Business Asset Disposal Relief (BADR), previously referred to as Entrepreneur’s Relief, offers a preferential Capital Gains Tax rate of 10% on the initial £1 million of taxable gains, dependent upon meeting specific conditions. This makes it a more attractive option for eligible individuals seeking to minimise their tax liabilities on business asset disposals.
However, in the recent Budget, Chancellor Rachel Reeves announced that the rate will increase to 14 per cent for business disposals made on or after April 6, 2025 and this will rise again to 18 per cent from April 6, 2026.
Laura Adkins, Director at accountants and business advisors Whitley Stimpson, said:
“Anyone who has been pondering over selling their business needs to act now if they want to take advantage of the current beneficial tax regime. They should make it their new year resolution to accelerate their plans and seek advice to ensure they gain maximum value or face a tax bill that will be considerably heftier in a couple of years’ time.”
To qualify for BADR, sellers must meet several criteria. They must have been an officer or employee of a trading company and have held this position for at least two years leading up to the sale. Additionally, they must have owned at least five percent of the company’s ordinary shares and been entitled to exercise at least five percent of the voting rights during this period.
BADR is also subject to qualifying gains up to a lifetime limit of £1m, currently worth up to £140,000 in capital gains tax savings per individual. This rate will remain, but the maximum saving will fall to £100,000 from April 2025 and drop again to £60,000 from April 2026.
Laura added:
“These changes caused a stir at the Budget but at least there is still time to do something about it before they come into effect. We have highly experienced advisers ready to help make what could prove to be a substantial difference for business owners looking to exit.”
For further information contact Laura Adkins.