Chancellor increases Capital Gains Tax (CGT) on Business Asset Disposal Relief (BADR) from April 2025
BADR still available for Members’ Voluntary Liquidations at the current 10% tax rate until 5th April 2025
The Chancellor did not scrap BADR in her budget on 30th October as many had predicted, but she did increase the current Capital Gains Tax rate that applies to BADR from 10% to 14% for disposals made from 6th April 2025, and from 14% to 18% for disposals made from 6th April 2026. But what does this mean to those business owners/directors who are looking to close their solvent businesses down using a Members’ Voluntary Liquidation.
Act now to benefit from the current 10% tax rate on BADR
When business owners decide to sell or wind-up their solvent company using Members’ Voluntary Liquidations (MVLs), they might be eligible for Business Asset Disposal Relief. This has been an attractive and popular method of reducing the amount of Capital Gains Tax that must be paid following the closure of a solvent company, from the standard rate to a 10% rate.
The relief is capped at a lifetime limit of £1 million, which at the 10% tax rate means that the maximum saving per person is currently £100,000.
However, following the budget’s changes, if you are looking to close your solvent company via an MVL and qualify for BADR (your accountant can advise if you do qualify for BADR) and do not want to pay the increased CGT that is coming next spring, then please contact us for an initial discussion. Each individual’s tax position will be different, so it is important to take appropriate advice in the first place from your specialist tax advisor.
The deadline for new MVLs qualifying for BADR to enjoy the current 10% is likely to be mid-February 2025 if we are to be able to make a distribution pre-6th April 2025.
Some of the other Budget measures and their possible effect on businesses
The headline tax/cost increases in the Budget affecting businesses were:
- An increase in the rate of employer NICs to 15% and a cut in the Secondary Threshold to £5,000 from April 2025.
- The National Living Wage (NLM) will rise from £11.44 to £12.21 an hour from April 2025 and there will also be an increase in the National Minimum Wage for 18 to 20-year-olds from £8.60 to £10 an hour.
- The current 75% discount in business rates will be replaced by a reduced discount of 40% up to a maximum of £110,000 in April 2025
Elaine Wilkins, Director at our Bournemouth office said:
“These measures will have an effect on businesses. We are particularly concerned for businesses in the hospitality and childcare sectors who traditionally employ a larger number of staff on minimum wage. They will see a huge increase in staff costs, as a result, and with the added burden of an increase in employer national insurance contributions, we envisage an increase in enquiries.”
As Tina McKenzie, the Policy Chair of the Federation of Small Businesses said:
“Larger small, and medium-sized, businesses will struggle with the rises on employer national insurance. We’ve been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages and prices.”
As Insolvency Practitioners our aim is always to help struggling businesses survive and turn things around. The sooner we are contacted, the more we can do to help.
Chancellor increases Capital Gains Tax (CGT) on Business Asset Disposal Relief (BADR) from April 2025
BADR still available for Members’ Voluntary Liquidations at the current 10% tax rate until 5th April 2025
The Chancellor did not scrap BADR in her budget on 30th October as many had predicted, but she did increase the current Capital Gains Tax rate that applies to BADR from 10% to 14% for disposals made from 6th April 2025, and from 14% to 18% for disposals made from 6th April 2026. But what does this mean to those business owners/directors who are looking to close their solvent businesses down using a Members’ Voluntary Liquidation.
Act now to benefit from the current 10% tax rate on BADR
When business owners decide to sell or wind-up their solvent company using Members’ Voluntary Liquidations (MVLs), they might be eligible for Business Asset Disposal Relief. This has been an attractive and popular method of reducing the amount of Capital Gains Tax that must be paid following the closure of a solvent company, from the standard rate to a 10% rate.
The relief is capped at a lifetime limit of £1 million, which at the 10% tax rate means that the maximum saving per person is currently £100,000.
However, following the budget’s changes, if you are looking to close your solvent company via an MVL and qualify for BADR (your accountant can advise if you do qualify for BADR) and do not want to pay the increased CGT that is coming next spring, then please contact us for an initial discussion. Each individual’s tax position will be different, so it is important to take appropriate advice in the first place from your specialist tax advisor.
The deadline for new MVLs qualifying for BADR to enjoy the current 10% is likely to be mid-February 2025 if we are to be able to make a distribution pre-6th April 2025.
Some of the other Budget measures and their possible effect on businesses
The headline tax/cost increases in the Budget affecting businesses were:
- An increase in the rate of employer NICs to 15% and a cut in the Secondary Threshold to £5,000 from April 2025.
- The National Living Wage (NLM) will rise from £11.44 to £12.21 an hour from April 2025 and there will also be an increase in the National Minimum Wage for 18 to 20-year-olds from £8.60 to £10 an hour.
- The current 75% discount in business rates will be replaced by a reduced discount of 40% up to a maximum of £110,000 in April 2025
Elaine Wilkins, Director at our Bournemouth office said:
“These measures will have an effect on businesses. We are particularly concerned for businesses in the hospitality and childcare sectors who traditionally employ a larger number of staff on minimum wage. They will see a huge increase in staff costs, as a result, and with the added burden of an increase in employer national insurance contributions, we envisage an increase in enquiries.”
As Tina McKenzie, the Policy Chair of the Federation of Small Businesses said:
“Larger small, and medium-sized, businesses will struggle with the rises on employer national insurance. We’ve been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages and prices.”
As Insolvency Practitioners our aim is always to help struggling businesses survive and turn things around. The sooner we are contacted, the more we can do to help.