With less than nine weeks to go until the end of the tax year, if it works for you commercially and personally, we recommend unlocking the lower Business Asset Disposal Relief (‘BADR’) rates before it’s too late, to capitalise on either the 10% rate until 5 April 2025, or the 14% rate until 5 April 2026.
The Labour Budget on 30 October 2024 was a highly anticipated event in 2024 to see what the Government would do to turn the country’s fortunes around. In particular, what changes would they put through to Capital Gains Tax (CGT), which was widely speculated to rise to be in line with income tax rates.
The jury is still out as to whether things will improve for the better as a result of the Budget (with current media speculation that things are actually looking worse). But it was nice to see increases to CGT rates were not as drastic as expected – the basic rate having increased from 10% to 18%, and the higher rate from 20% to 24%, bringing both of these in line with the residential property rates of CGT.
Tax advisers and business owners also feared the death knell for BADR in this Budget, but there were no dramatic changes to the qualifying conditions, or £1m lifetime limit, but instead a progressive increase in the rate of BADR from 10% to 18% over the next couple of tax years.
Key facts and figures:
Capital Gains Tax
- Basic Rate – 18% from 30 October 2024
- Higher Rate – 24% from 30 October 2024
Business Asset Disposal Relief
- 10% to 5 April 2025
- 14% from 6 April 2025 to 5 April 2026
- 18% from 6 April 2026
The Government also introduced anti-forestalling provisions with the aim of preventing people using certain types of contracts / clauses from trying to get around the increase in tax rate.
What can you do now?
Whilst increased tax rates are not always welcome, there is still time to make use of the lower rates of BADR where you are looking to exit from your business, or a business you have a capital interest in, such as through a:
- Management Buyout (‘MBO’)
- Company Purchase of Own Shares (‘CPOS’)
- Trade Sale
- Employee Ownership Trust (‘EOT’)
- Members Voluntary Liquidation (‘MVL’)
“Delaying until after 5 April 2026 could cost you up to £80,000 in tax on a £1m transaction that qualified for BADR compared to completing before 5 April 2025”.
Speak to our team
If you would like to discuss the points above in more details and how they might affect your business, please get in touch with our team.
With a Corporate Finance team and 70-strong Tax team, PEM can assist you in identifying and implementing the most appropriate exit structure for you and your business. Whether that’s looking to structure or finance an MBO or identify target buyers for a trade sale, we can assist you with both the personal and corporate pre-transaction planning, transaction support and post transaction tax advice, tax returns and IHT planning.
