The Chancellor, George Osborne, announced today that Entrepreneurs' Relief will be increased to £5m. This is welcome news for anyone who is looking to sell their business, especially if it is valued in the £1m-£5m range.
Previously, if someone sold their business for up to £2m then, subject to certain criteria, they only paid 10% capital gains tax (CGT) on the proceeds. The once-in-a-lifetime relief is mainly aimed at long serving business owners who sell their company in order to fund their retirement. Given that the marginal rate of capital gains tax for higher earners has now risen to 28%, this is a valuable relief.
Let's take someone who sells their business for £5 million. Without Entrepreneurs' Relief their tax liability would stand at £1,389,900, taking into account their personal CGT allowance. With Entrepreneurs' Relief at the new threshold, the CGT liability would only be £489,900, a savings of £900,000.
It should be noted that the personal CGT allowance has been frozen at £10,100.
The Chancellor has given some other tax concessions to business in the form of increased investment reliefs for plant and machinery, corporation tax reductions, and reductions in employers national insurance contributions.
Given the lower tax burden on UK businesses in comparison to other countries, then now is a good time to invest in UK businesses. The current low value of sterling also represents an added opportunity to overseas investors.
