Businesses only have seven weeks to go until higher CGT rate kicks in
Andrew Duncan · Posted on: February 19th 2025 · read
Leading Accountants and Business advisors at MHA are warning UK business owners that to avoid leaving it too late to qualify for the current 10% Capital Gains tax rate under Business Asset Disposal relief (BADR) they need to get moving to hit the 6 April 2025 deadline when the taxable rate jumps to 14%.
As Andrew Duncan, Restructuring & Recovery Director at MHA explains,
“BADR or Entrepreneurs' Relief as it used to be known is a valuable tax relief and has been under threat for many years. It was hardly a surprise when changes to the regime were introduced last October by the Chancellor that any disposal after 6 April 2025 will be deemed too late to qualify for the existing 10% CGT rate. Instead, from that date it will be charged at 14%."
"And from 6 April 2026, gains eligible for BADR will be taxed at 18%. This means that, from April 2026, BADR relief will be in line with the lower main rate of CGT, which rose from 10% to 18% in the Budget."
In practical terms, this means business owners will be paying an additional £4,000 tax on every £100,000 distributed after 5 April 2025 or £40,000 on the limit of £1,000,000 and £8,000 on every £100,000 or £80,000 of on the limit of £1,000,000 distributed after 5 April 2026 and this is clearly worth considering if an exit is on your horizon.
Andrew's Final Thoughts
"So, our message to individuals looking to extract capital from their business without paying over an unnecessary chunk of cash to the HMRC is to talk to their advisors and without delay enter a Members Voluntary Liquidation scheme to receive a capital distribution prior to April 2025."
