Preparing for the Autumn Budget: What Business Owners Need to Know About Potential Tax Changes
With October just around the corner, the autumn budget is fast approaching, and many business owners are now considering how potential changes might impact their operations. In some cases, this uncertainty has even prompted business owners to explore selling or exiting their businesses. To help you navigate this uncertain time, we’ll break down the key issues and how they could affect you.
Possible Tax Increases in the Autumn Budget 2024
There is growing speculation about tax increases in the upcoming budget. According to the Chancellor, there’s a £22 billion deficit in public finances, making it likely that both personal and business taxes will be adjusted. While there are plans to introduce growth initiatives, these changes will likely include tweaks to Inheritance Tax and Capital Gains Tax (CGT), including potential alterations to Business Asset Disposal Relief. The government has ruled out increases to income tax, as promised in its manifesto.
Business Asset Disposal Relief: A Likely Target
One area likely to see changes is Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief). This tax relief encourages entrepreneurship by offering tax savings when business owners sell their companies. However, it has come under scrutiny for being too generous. In the 2022/23 financial year, this relief saved sellers around £1.1 billion in taxes. As a result, many business owners are considering selling their businesses now to take advantage of the current relief before any changes are made.
Key Considerations Before Selling Your Business
If you’re a business owner thinking of selling before the autumn budget changes take effect, here are some important factors to keep in mind:
- How Will the Buyer Fund the Purchase?
Buyers may need financing, or they could request a deferred payment structure. If you’re pushing for a quick sale, this could give the buyer leverage to negotiate a lower price. It’s essential to consider how the deal will be funded before proceeding.
- Aligning on Timescales
You and your buyer need to agree on a realistic completion date. At Acumen Business Law, we specialize in managing fast-paced transactions, ensuring deals stay on track and are completed on time.
- Alternative Sale Options
If a traditional sale doesn’t align with your business goals, consider alternatives like a management buyout or an employee ownership trust. If you think these options may suit your business, reach out to us, and we’ll connect you with the right expert.
Tax Efficiency and HMRC Clearance
Before finalizing any sale, consult with your accountant to ensure you’re choosing the most tax-efficient approach. If HMRC clearance is required, be aware that it can take time, so plan accordingly if you’re working on a tight deadline.
Long-Term Impact on UK Businesses
Increased taxes on business sales could have a long-term impact on UK business owners. If the Capital Gains Tax rate on shares increases from 20%, and the maximum tax on dividends (currently at 39.35%) rises, many business owners may rush to sell before the changes come into effect. If the CGT rate does increase, it’s possible the new rates could be implemented as soon as October 30th, 2024, preventing immediate post-budget sales.
Potential Capital Gains Tax Reforms
There are several ways the Chancellor might reform Capital Gains Tax:
- Taxing capital gains at income tax rates, which could be up to 45% for high earners
- Setting a fixed tax rate on gains (previously 30%)
- Introducing a taper system where short-term gains are taxed more heavily than long-term gains, similar to the U.S. system
- Establishing exemptions and setting limits on gains
If the changes take effect in April 2025, it could lead to a surge in business sales as owners try to avoid higher taxes. However, there is also the possibility that the changes will be less severe, such as by increasing the lifetime limit for Business Asset Disposal Relief.
Contact Us to Discuss Your Exit Strategy
If you’re considering selling your business, whether due to the budget or for other reasons, we’re here to help. Contact us at [email protected] or call 01273 447 065 to speak with our corporate team.
Get in Touch Today
Navigating the potential tax changes from the autumn budget can be challenging. Whether you’re looking for advice on the Capital Gains Tax changes or want to explore selling your business, our team at Acumen Business Law can guide you through the process. Get in touch today to arrange a meeting and discuss your exit strategy.
