Thinking of selling your business? The importance of understanding the tax cost

There has been almost constant speculation for the past 3 years about whether the government might choose to align capital gains tax rates with income tax rates. 

This is of particular concern for anyone planning to sell their business in the short or medium term.

The current gains tax paid on the sale of a trading business is 10% on the first £1M, due to Business Asset Disposal Relief (BADR), assuming this hasn’t already been used previously by the taxpayer and 20% on the balance.

If, in the future, capital gains tax rates are aligned with income tax rates, the top rate of gains tax could increase from 20% to 45%. This equates to an extra £250,000 tax for every £1M of sale proceeds.

Whilst the current conservative government have so far chosen to leave the capital gains tax rates alone, we are looking ahead to a potential change of government at the next general election. The latest date that the next general election could be held is January 2025 and increasing capital gains taxes is considered to be a likely choice for a new Labour government to make.

Peter Glenton
Author Peter Glenton

This leaves less than 2 years for any business owner contemplating a sale to get a transaction over the line. However, anyone wishing to sell before the next election needs to work to an even shorter timeframe due to the fact that any exit process tends to be more protracted than initially anticipated. The present uncertainty over the future direction of interest rates means that it is taking buyers longer to obtain finance than in recent years too.

If you are interested in exploring a sale of your business in the immediate future please get in touch with or

Photo by Kaleidico on Unsplash

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