Business Asset Disposal Relief: Changes to CGT Relief and the Consequences for Business Owners

The much anticipated autumn Budget delivered a number of headline grabbing tax changes. Of principal interest to small and medium sized business owners were the changes to Business Asset Disposal Relief (BADR), that somewhat slipped under the radar.

Capital Gains Tax (CGT) is charged on qualifying business and asset sales, and is now charged at a rate of 24% for higher rate tax payers following the recent Budget. As always with tax codes, calculating the actual tax payable on a qualifying disposal can be a complex process subject to a number of caveats, and appropriate tax advice should always be sought.

BADR offers entrepreneurs looking to sell their business a reduced CGT rate of 10% on the first £1m of lifetime gains they make when selling a qualifying business asset. Accordingly, it can prove a remarkably beneficial tax relief for those business owners looking to maximise their return on the sale of their business.

Taxes on Business Disposals Set to Rise

Following the 2024 budget, the relief offered by BADR is set to decrease. Initially, the rate payable on the first £1m of a qualifying disposal will increase to 14% on 6 April 2025, followed by a further increase to 18% on 6 April 2026.

For business owners considering selling, retirement or pursuing new opportunities, these increases carry substantial implications for their exit strategies. Following the changes, owners may now be considering accelerating their exit plans to maximise the wealth they can generate from the disposal of their assets.

Planning for an Exit

This is the first in a series of articles that the Corporate team at Clarkslegal will be publishing on the consequences of the changes to BADR, the different types of exit available and how owners can best position themselves to market their business to potential buyers.

In the meantime, if you have any questions on the issues raised in this article or would like to get more information regarding the sale of your business, please get in touch with one of our corporate team. They will discuss your particular circumstances and help you understand your options. As specialists in advising business owners on exiting their business, we also have a strong network of tax and financial advisors who we can work alongside to ensure your exit is structured as efficiently as possible, ensuring you exit with more money in your pocket.

Sign up here to our next Corporate event on –Preparing your business for exit