Growth and succession planning for your business – Budget 2024
Changes announced in the budget may impact on the future decision making of business owners depending on age, so planning business succession and the future exit from the business needs careful consideration.
Tax changes
The main rates of Capital Gains Tax CGT (10% and 20%) increased to 18% and 24% with effect from 30 October 2024. The lower rate applies to individuals to the extent that any gains fall within their unused basic rate income tax band, with the higher rate applying to other gains made by individuals and trusts.
These main rates are now in line with the rates that previously applied to gains on residential property, and they, therefore, apply to all gains except those relating to carried interest, and those which qualify for Business Asset Disposal Relief (BADR) or Investors Relief (IR).
Where the main rates do not apply other changes were announced, although these will not all apply with immediate effect.
Carried interest gains which had previously been subject to CGT at 18% or 28% will be subject to CGT at a single rate of 32% with effect from 6 April 2025.
Secondly, the 10% rate that currently applies to gains qualifying for BADR and IR will be increased to 14% from 6 April 2025, and to 18% for disposals made from 6 April 2026.
BADR is available for qualifying disposals of business assets up to a lifetime limit of £1m per individual. For the remainder of the current tax year, the potential benefit will increase to £140,000, before it then falls to £100,000 again in 2025/26, and £60,000 from 2026/27 onwards.
The BADR lifetime limit was reduced to £1m in 2020, and the IR limit has now similarly been reduced to £1m from 30 October 2024.
From 6 April 2025, AIM shares and quoted but unlisted shares will now qualify for only 50% relief. Shares held in family or personal companies typically won’t be affected as they are not quoted on any exchange, but they will count as part of the £1m threshold for 100% Business Property Relief (BPR) and potential IHT changes.
What can you do now?
Perhaps now is a good time to review the structure of your business and consider whether a change to company structure and shareholdings would be beneficial.
Given the £1m threshold we will have to wait and see if HMRC have the manpower and resources needed to review/agree valuations for reliefs claimed particularly where the sale proceeds are nearer the £1m threshold.
Selling your business to an Employee Ownership Trust still has some attractive tax benefits but following a recent consultation there are several changes to the scheme which have been broadly welcomed.
Finally, whilst many business owners are still getting to grips with the tax changes in the 2024 budget, it is worth remembering that for many exiting a business may be many years away in the future, giving time to grow the business rather than worrying about a tax position which could change again with a different government.
Balbor Sundar is a Partner at Mercer & Hole www.mercerhole.co.uk
