Autumn Budget and Capital Gains Tax: are you prepared?

Getting ready for the rumour mill.

With the new Chancellor, John Healey, due to deliver the Autumn Budget on 28 October, speculation is already building around Capital Gains Tax (CGT), particularly for business owners considering an eventual sale or exit.

At this stage, nothing has been confirmed, but commentary has raised the possibility of CGT being brought closer to Income Tax rates.

This isn’t new and has been suggested before, but it is a topic we are being asked about often at the moment.

What is actually being speculated?

Currently, CGT on qualifying business assets stands at 18 per cent for basic rate taxpayers and 24 per cent for higher rate taxpayers.

Business Asset Disposal Relief offers a rate of 18 per cent on the first £1 million of qualifying lifetime gains, therefore providing a lower rate of CGT for higher rate taxpayer.

If rates were aligned with Income Tax, some business owners could face rates of up to 40 per cent or 45 per cent on business disposals, thereby reducing the net proceeds of a sale.

Should you rush to sell?

For most business owners, finding a buyer and completing a sale within a matter of weeks simply is not realistic.

If you are not already in active conversations about a sale, a rushed transaction before 28 October is unlikely to be achievable, and selling for tax reasons alone is rarely the right motivation.

What matters more is being properly prepared, so that whenever the right time comes, whether prompted by a future tax change, a personal circumstance or simply the right offer, you are ready to act quickly.

Here are some steps that are worth considering now:

Obtain a current valuation of your business interest, establishing a clear baseline figure
Review your shareholders’ or partnership agreement for any pre-emption rights or transfer restrictions
Check your eligibility for reliefs such as Business Asset Disposal Relief, particularly if you are close to meeting the qualifying holding period
Consider whether a phased exit could suit your circumstances
Open early conversations with potential buyers, so you are not starting from scratch if you need to move quickly

We are here to help

Whatever the Autumn Budget contains next month, being prepared puts you in a stronger position.

If you would like to talk through your own circumstances or simply want to understand how potential changes could affect you, we would be glad to help.