The Chancellor has given some tax concessions to business in the form of business rates, increased investment reliefs for plant and machinery, and entrepreneur’s relief. Entrepreneur’s relief is the crucial one for people looking to sell their business. At present, if someone sells their business for up to £1m then, subject to certain criteria, they will only pay 10% capital gains tax (CGT) on the proceeds. This is a one-off relief, mainly aimed at long serving business owners who sell in order to fund their retirement. Given that the marginal rate of capital gains tax is 18%, this is a valuable relief.
In the budget today, Alistair Darling announced that entrepreneurial relief will be increased to £2m. This is welcome news for anyone who is looking to sell their business, especially if it is valued in the £1m-£2m range. However, given the pre-budget rumours surrounding the possible rise in the standard CGT rate and the perception that capital gains tax is really only paid by the wealthy CGT will be no doubt be looked at closely after the election. Of course, with the labour government’s love of stealth taxes we suspect that the devil will be in the detail of the legislation. It should be noted that the CGT allowance has been frozen at £10,100. The tax take from CGT is perhaps higher than was expected as asset prices have risen quite significantly in the last year.
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