With the upcoming changes to tax rates, selling your business prior to April 6th 2025, could save you a significant amount of money. The recent labour budget announced increases to Capital Gains Tax (CGT) for Business Asset Disposal Rates (BADR), which will impact the proceeds you’ll receive from selling your business.
If you want to maximise your sale proceeds and minimise your tax liability, the time to act is now – don’t wait until March.
What is Business Asset Disposal Relief (BADR)?
Previously known as Entrepreneur’s relief, BADR allows for taxpayers to benefit from a lower rate of CGT on the sale of qualifying business assets compared to the regular CGT rates.
The current rate is 10% with it increasing to 14% from 6th April 2025 and 18% from April 2026, up to a lifetime limit of £1 million. These compare with the rates of 18% and 24% on non-business gains.
To be entitled to this relief, there are a number of qualifying conditions which must be met for at least two years up to the date of sale, these include:
- The business must be owned for a minimum of two years.
- The disposal must represent the whole business or if part of the business is being disposed of, must represent a business capable of being carried on, in its own right.
- The sale of shares must be from a trading company, or the holding company of a trading group and the shares must be held for at least two years by an employee or office holder of the company.
Why selling before April 6th makes sense
If you meet the above criteria and are looking to sell, it’s essential to act prior to April 6th 2025 to benefit from the current rate of 10% and potentially save you considerable tax, depending on the value of your business.
Waiting until the last minute to sell can lead to unnecessary stress and missed opportunities. If you are looking to sell, it is crucial to plan your exit and give yourself enough time to prepare for a smooth disposal.
The Risks of Waiting
The process of selling a business can be complex and waiting until March 2025 can lead to complications such as:
- Tax Planning – Selling a business gives rise to various tax considerations. Business Asset Disposal Relief is time-sensitive and ensuring it has been applied correctly requires careful planning, delaying it till the deadline could reduce your ability of taking advantage of the relief.
- Valuation and Negotiations – Careful valuation and negotiations with potential buyers is vital when selling a business, rushing through the sale process can result in a less-than-ideal sale price and opportunities to negotiate favourable terms.
- Due Diligence – When conducting the sale of a business, buyers will conduct thorough checks to assess the financial health and potential risks of managing the business. Ensuring all documents are in order and the business is ready for sale, can be time consuming, therefore leaving it till the deadline can be perilous.
