With the Autumn Budget so recently behind us, we know that this has been a challenging few weeks for business owners with a potential sale on the horizon.
Although an increase in Capital Gains Tax (CGT) was no major surprise, changes to Business Asset Disposal Relief (BADR) have put plenty of business owners in a sticky situation.
Chancellor Rachel Reeves announced that, from April 2025, taxable gains will be taxed at a rate of 14 per cent, rising again to 18 per cent in April 2026 – a significant increase in the current rate of 10 per cent.
Coupled with the rising cost of employment, we know that the next few months are going to be critical if you’re looking to sell your business or dispose of key assets.
Is acceleration the right move?
There has been a lot of discussion since the Budget around whether you should look to bring the disposal of your business forward – and this will entirely depend on where you are in the process and whether you have the resources to do so.
From a tax perspective, it is looking like an early sale before April 2025 is the way forward, as you could end up paying significantly less CGT on taxable gains.
Bear in mind that this will make more of a difference the larger your taxable gains, so you should consider an accelerated sale particularly carefully if you expect to make a large gain.
However, if your business is not in a position to be sold, then an accelerated disposal probably will not achieve what you want it to.
We would therefore recommend that you take the time to get your business ready to sell if you plan to dispose of it in the next 12 to 18 months.
Is it sale-ready?
‘Ready to sell’ looks different for every business, depending on its market, its development stage, the needs of the buyer and its legal and financial obligations – but there are some common themes that we encourage you to consider before putting your business to the market:
- Checking and evidencing the financial health of your business, including profit and loss statements, balance sheets and tax returns and records.
- Identifying and valuing any intellectual property and other major assets.
- Having your business provisionally valued, including all assets you wish to sell.
- Considering how you plan to maintain operational stability, such as staff retention and a strong management team, where applicable.
Above all, we encourage you to take professional advice before putting your business on the market. We are likely to see a lot of accelerated business sales in the coming months, so you need to make sure yours is executed properly.
Need further advice? Get in touch with us here.
By Pratima, Tax Partner