With the Autumn Budget 2024 fast approaching, there’s been plenty of talk surrounding potential changes that could impact small businesses and individuals. As always, staying ahead of tax changes is key to ensuring your business is well-positioned to handle any new measures.
While much is still speculative, here’s what small business owners should be aware of based on current rumours and insights from various sources.
Capital Gains Tax (CGT) on the Rise?
There are growing concerns that Capital Gains Tax (CGT) could see a significant increase. Current rumours suggest that rates might align more closely with income tax bands, meaning higher earners could face rates as high as 45%.
This could have a major impact on small business owners looking to sell assets, shares, or even entire businesses. If you’ve been thinking about selling a business or disposing of any large assets, now might be the time to act. It may be wise to complete these transactions before the Budget announcement to lock in current, lower CGT rates.
Changes to Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) allows business owners to pay a reduced rate of CGT—currently 10%—on qualifying disposals, including the sale of a business. However, rumours indicate that this relief could be targeted in the upcoming Budget, either through reduction or restriction.
For business owners considering a Members’ Voluntary Liquidation (MVL) or selling a company, there could be significant changes ahead. Acting sooner could ensure you benefit from existing reliefs.
Inheritance Tax (IHT) Reliefs Under the Microscope
While there hasn’t been an explicit promise to overhaul Inheritance Tax (IHT), rumours suggest that exemptions like Agricultural Property Relief (APR) and Business Property Relief (BPR) could face reforms. These reliefs have been crucial for family-owned businesses and farms, allowing them to pass on assets without a hefty tax bill.
For small business owners or those in farming, now is a good time to review your estate planning strategies. Ensuring that your business structure is as tax-efficient as possible could save your family from significant tax liabilities in the future.
VAT on Private School Fees
One confirmed change from the Budget is the introduction of VAT on private school fees, starting in January 2025. Additionally, charitable business rates relief for private schools will be removed from April 2025.
While this may not directly impact every small business, it’s important for business owners with children in private education to be aware of these additional costs.
Pension Tax Relief Could Be Reduced
There’s speculation that pension tax relief may move to a flat rate of 30%, replacing the current system where higher earners can receive relief of up to 45%.
If you are a higher-rate taxpayer and regularly make pension contributions, it may be worth increasing your contributions before the Budget to make the most of the existing tax relief. There are also concerns that the 25% tax-free lump sum could be reduced over time, which could affect your long-term retirement planning.
What Can Small Business Owners Do?
With these potential changes on the horizon, small business owners should start preparing now. Here are some key actions you might consider:
- Review your assets: If you’re planning to sell a business, property, or other significant assets, consider whether you can complete the transaction before the Budget announcement to benefit from current CGT rates.
- Pension contributions: If you’re a higher earner, maximise your pension contributions under the current relief system before any changes are introduced.
- Estate planning: If your business is likely to benefit from IHT reliefs like APR or BPR, now is a good time to review your estate planning strategy with an advisor.
As always, I’m here to help you navigate these changes and ensure that your business is in the best possible position. Feel free to get in touch if you’d like to discuss any of these potential changes and how they might affect your situation.
Key Takeaway: Staying informed and acting early can help small business owners mitigate the impact of new tax measures. The Autumn Budget may bring significant changes, and preparation is key.
