Five months left to sell your property business

I was worrying about the Autumn Budget for months. The Government was initially threatening to increase the tax that people pay when they sell their business by 450%. Had this happened, I would never have sold another property business again!

Fortunately, the Government realised that such a move would decimate the amount of Capital Gains Tax (CGT) that they collect so their final decision was to increase the rate for asset sales by just 4%. This is survivable. However business owners have not got off scot-free .

Someone selling a business worth £1 million will pay £100,000 in tax if they sell in the next five months, £140,000 if they sell in the next 17 months and £180,000 if they sell thereafter.”

When someone sells a business they can claim business asset disposal on the first £1million per shareholder of net gain. At the moment, the rate is 10% but this will increase to 14% in April 2025 and 18% in April 2026. This means that someone selling a business worth £1 million will pay £100,000 in tax if they sell in the next five months, £140,000 if they sell in the next 17 months and £180,000 if they sell thereafter.

If you are thinking of selling your business you should therefore try to complete the sale as quickly as possible.

Avoidance measures

Different rules apply to people who are selling a business worth over £1 million. The rate of CGT for a higher rate taxpayer increased from 20% to 24% at midnight on 30^th October. Fortunately, whilst there is little that people can do to avoid the increase in national insurance rates ,there is a great deal that can be done to avoid paying this increase in CGT. This includes giving shares to your spouse, making a pension contribution, investing in an EIS or a VCT, setting up a group holding company, claiming rollover relief or leaving the country.

For these reasons, the Government will probably collect less tax than they are expecting to from their CGT increase which means that they may try to increase CGT rates still further in a future budget.

Do bear in mind though that tax is a complicated subject and you cannot consider these avoidance measures without first taking advice from a specialist tax advisor (not just your accountant).

We now seem to have a traditional tax and spend Labour government and tax rates will only move in one direction. If you are thinking of selling your property business, it would therefore be best to do so as soon as possible, and ideally before 5^th April 2025.