Tax rules tighten on business disposals after Budget, leading accountant warns
Some businesses will miss out thanks to new tax rules on business disposals announced in today's Budget, a leading accountant has warned.
Responding to the Autumn Budget, Steven Martin, Senior Tax Manager at Hampshire-based HWB Chartered Accountants, said: “Some business owners will pay considerably more in Capital Gains Tax (CGT) should they decide to sell their business from 6 April 2027.
“That’s because the Chancellor has halved the eligibility threshold for Business Asset Disposal Relief (BADR) from £1 million to £500,000.
“If you have a gain of £1 million, you would currently be liable for a tax bill of £180,000 due to the 18% tax rate.
“From next April, only the first £500,000 is taxed at 18%. The other half will attract a 24% rate, meaning the total bill will be £210,000, a rise of £30,000, on the same gain.
“In better news for the business community, the Chancellor announced Founders’ Relief, a new CGT relief for founders and early investors setting up high-growth, innovative UK companies.
“It will apply a 10% rate of CGT to qualifying disposals of shares, up to a lifetime limit of £10 million of gains per individual.
“This is a little like the old Entrepreneurs’ Relief but with more restrictive qualifying criteria.
“You must hold at least 25% of the ordinary shares, have a turnover of £10 million or more, and have at least 15 full-time equivalent employees.
“Among other measures designed to support SMEs, the Chancellor signalled a commitment to maintain full expensing for capital investment and include predevelopment costs as part of capital allowances. He has also increased the first year allowance from 40% to 50%, and said the government would consult further on R&D reliefs.
“There was also some cheer for pensioners with the announcement of a new Pension Tax Allowance.
“The aim is to ensure low-income pensioners do not pay any income tax on their state pension.
“In a nutshell, if your income sits above the ordinary personal allowance, the new measure will remove income tax liability on that tax band.
“There was less welcome news for savers and landlords with a 2% increase on Income tax, bringing the basic rate to 24%, higher rate to 44% and additional rate to 49%.
“Our message, as ever, is to take professional advice on the tax aspects of financial planning so you can act confidently to take advantage of applicable rates, allowances and incentives.”
HWB Chartered Accountants, founded in 1985 and based at Chandler’s Ford, near Southampton, provides business and tax advice. For more information, visit www.hwb-accountants.com.