November 13th, 2020 / Insight posted in Articles

Potential changes to capital gains tax ahead – an update

The Office of Tax Simplication’s report last week on capital gains tax makes a number of suggestions to the Chancellor which would fundamentally change the capital gains tax rules in the UK if he chooses to adopt them. This clearly signals the direction of travel as they include aligning the capital gains tax rate with income tax rates which would dramatically increase the tax due when businesses are sold. The likelihood of capital gains tax rates going up in the new year is very high.

This would be a major blow to those who have spent long lean years building up their businesses with an eye on the prize of realising the value through some sort of exit event. It was only in March 2020 that the entrepreneurs’ relief limit was reduced from £10 million to £1 million with a balance of capital gains tax payable at a rate of 20%. If this 20% rate increases to 45% from Budget day then, in a little more than a year, business owners will have seen a fourfold increase in the total tax they will pay when they sell their business.

Standing in the shadow of Coronavirus with Brexit looming is arguably not the time to panic and rush an attempt to sell your business, and there are many other routes to consider.

Our corporate finance team of business and tax advisers can talk you through what is possible in the time available and how to maximise the value you can generate in the current economic climate. We will help you explore:

  • Management buy-out structures
  • Family succession planning using trusts
  • Indirect employee ownership, using a tax exempt disposal to an employee ownership trust

We can build a plan bespoke to your circumstances, drawing on our team’s wealth of experience.

The Budget could be delivered sometime early in the new year once the uncertainty of Brexit negotiations has ended. If you would like a no-obligation initial call, we are here and ready to help.