https://www.gov.uk/business-asset-disposal-relief The Chancellor's Autumn budget was an interesting one, to say the least. Now, a week on, the big headlines have died down, and hopefully, businesspeople are starting to reflect on how to deal with the changes.
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Autumn Budget 2024 – An Insolvency Practitioners viewpoint one week on.Posted: Nov 6, 2024

Capital Gains Tax and Entrepreneurs Relief – A change as we predicted.

In our previous blog, we looked at the immediate response to the big financial questions. From the insolvency perspective though, there were a few no less important, but perhaps less generally recognised matters to deal with.

 

A week in, it’s time to take a deeper dive into the budget changes.

I can’t exactly claim magical precognition skills by saying that we predicted the change to Capital Gains (CG) tax before the budget. In fairness, I think anyone even remotely connected to business finance has been fully expecting it to come under the Chancellors microscope for some time. Then, once she started to talk about ‘black holes’ in the country’s finances, it seemed one of the obvious and almost inevitable casualties of the need to raise some revenue.

As we have mentioned in previous blog posts, there has been what seemed an inevitable shift towards the increase for months. We and I suspect almost every Insolvency Practice, have been working hard in solvent liquidations throughout September and October to resolve as many as possible before the budget out of fear of it having a significant impact. It became a bit of a race against time to return funds to the shareholders because of concerns about how the budget would affect them.

The other area we were concerned could receive some unwelcome attention was what is still often known as ‘The Entrepreneurs Relief ’ despite it having a name change to the more accurate, though less catchy, Business Asset Disposal Relief (BADR) a few years ago.

As the budget rolled out, I was listening for the expected announcements and some indeed came.

 

The Autumn Budget - What we thought could happen, what did happen and what it means.

Let’s start with the good news. We had feared that Entrepreneurs Relief would be revised to match Capital Gains or even, as some people predicted, be removed entirely. In the event, it wasn’t as bad as expected.  BADR will remain unchanged but only for the moment.

What that means is that if you are entitled to it, for example, if you are exiting a business to retire, then you can claim up to £1m at a rate of 10%. Just bear in mind though that the £1m is a lifetime allowance. If you have previously claimed, then that will be taken into account and your allowance will reflect the previous transaction. It’s important not to confuse this with the lifetime limit on Investors' Relief which has now been reduced from £10 million to £1 million

From 6th April 2025 however, the BADR will move to 14% with a further change to 18% from April 2026. So, there is an adjustment coming and while it isn’t as much as many people expected, it is still an important difference. Further details of the change can be found at found on the .gov website https://www.gov.uk/business-asset-disposal-relief

As far as Capital Gains Tax goes, there were changes as expected. As of 30 October 2024, the basic rate of CGT on most assets increased from 10% to 18%, while the higher rate rose from 20% to 24%. While it perhaps isn’t as bad as it could have been, there is no getting away from the fact that that is a significant change.

So, what does all this mean to directors and shareholders moving into the next couple of years? Well, the main takeaway point is that if you are considering retirement from your business, we suggest you start doing it now to minimise the impact of the impending changes. While this roadmap for change is fixed on BADR, we should also remember that Capital Gains Tax could possibly move again. Traditionally the first budget from a new government tends to be the bad news one. However, these are difficult circumstances to judge. We are still reeling financially from the pandemic, inflation is still a little unstable, there is still a continuing global situation, and the Chancellor has been very clear that she intends to raise money. So, while we hope not, it’s not beyond the realm of possibility that another increase in CGT could happen in the next couple of years.

 

If you are thinking of solvent liquidation, then talk to us now.

If you want to claim in the current tax year, it is clearly time to start planning. We have a section specifically dedicated to this area. There is a lot of information on there and a handy download that will take you through the basics. That said, nothing beats a conversation on something as important as an MVL.

Bringing a solvent company to a close can be complex and involves a lot of work to ensure everything it resolved in the most efficient way. Here at Smart Business Recovery, we specialise in helping people through this process and are always happy to discuss things further. While we will do everything possible to make the process go smoothly and quickly, as we said, it is complex at times. The earlier we talk, the more likely we are to get things resolved in time.

 

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In October last year, a budget was delivered that will have repercussions for business throughout 2025. The questions facing directors and business owners in the UK are how much will it affect them, what do they need to do to deal with these changes and is now the time to start worrying about what will happen to your business?

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Having spent 30 years working with Companies in trouble we have seen this in the past, for example after the 2008 banking crisis, HMRC took the same approach only to return to their normal ways a couple of years later and in my experience, they can be even more aggressive as the demand for collections from the treasury increases. To make matters worse given the change in legislation in December 2020, now that HMRC are preferential creditors in an insolvency, they are likely to push even harder knowing they will be top of the queue for payment if the business fails.

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