Autumn Budget 2024. Changes for Shareholders

Are you aware of the reliefs that are being phased out following the recent Budget?

Most business owners are familiar with the former Entrepreneur’s Relief that gave them a 10% rate on the sale of their qualifying shares in their business.

It was rebranded as Business Asset Disposal Relief (BADR) in April 2020 when the lifetime limit was reduced from £10 million to just £1 million.

Fewer people will be aware that at the same time, an additional tax relief was introduced, called Investors’ Relief, which also gives a 10% rate on the sale of shares subject to qualifying conditions. Unlike Entrepreneur’s Relief, this relief did not require the investor to be an employee.

Despite Investors’ Relief having retained the £10 million lifetime limit, it was rarely utilised.

Both reliefs are being phased out as part of the Chancellor’s Budget announced last week. BADR is currently providing a rate of 10% for business owners on their qualifying disposals, but this rate will increase to 14% from April 2025 and increase further to 18% from April 2026, to bring it in to line with the lower main rate of Capital Gains Tax.

Similarly, Investors’ Relief will increase from 10% to 14% in April 2025 and further to 18% from April 2026. However, in addition the £10 million lifetime limit for Investors’ Relief was cut to £1 million with immediate effect from Budget day last week. Not only is immediate, but the reduction in lifetime limit in some cases applies to transactions prior to 30 October as well.

This cut is not actually expected to raise much in tax revenue and affects less than 50 people in the population but is being seen as a tidying up exercise by the Government.

Those wishing to crystallise on the 10% rate have a few months left in which to do so, and it is expected that there will be a number of business owners who sell given the tax hikes that they are facing across the board as a result of the Budget. Given the changes to Business Property Relief from inheritance tax that were also announced, selling your business may be a tax efficient method of succession planning.

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