Firstly we would like to wish everyone a Happy New Year. We hope you had a good break and are now ready to tackle the year ahead making 2023 a successful and prosperous year. With the announcement of the Spring budget set for the 15th of March 2023, there is speculation about potential changes to Capital Gains Tax (CGT).
In the November 2022 budget, the Chancellor of the Exchequer Jeremy Hunt announced the annual Capital Gains Tax exemption would fall from £12,300 to £6,000 from April 2023, then to £3,000 in 2024. Approximately 320,000 taxpayers in 2020/21 incurred a Capital Gains Tax charge, so it is hoped this will raise more than a few billion.
However, the decrease in the annual exemption primarily affects investors rather than business owners selling shares or their company in its entirety. A more significant Capital Gains Tax change has been anticipated for years, with many expecting a hike in rate, which may yet occur.
Currently, if you sell 51% plus of your shares to an Employee Ownership Trust there is a 0% Capital Gains Tax rate. Otherwise, the rate is 20% on the sale of shares which is reduced by Business Asset Disposal Relief (BADR) to 10% per executive shareholder who has held shares for more than 2 years. The limit is £1m in Business Asset Disposal Relief (BADR) per individual across their lifetime.
The Office of Tax Simplification (OTS) has previously recommended that Capital Gains Tax is in line with income tax perhaps with a retirement relief, although this was not implemented by the Chancellor. This Spring, the OTS is being closed, which puts Capital Gains Tax rates firmly back into the hands of the treasury for better or worse.
The speculation will no doubt rumble on, however, with the continued need to raise taxes and balance the fiscal books ideally any UK-based M&A deals today underway should be completed before the upcoming Budget. For other business owners considering their exit, a sale is a long process, and we live in a fast-changing time – we cannot predict or control the tax regime, but we can help you achieve a successful outcome.
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