Owner managers looking to sell their businesses must act fast ahead of the forthcoming hike in Business Asset Disposal Relief (BADR), according to corporate lawyer Kim Klahn.
Formerly known as Entrepreneurs’ Relief, BADR offers a reduction in the rate of Capital Gains Tax (CGT) paid on the sale of businesses and assets. Instead of the standard rate, qualifying disposals are currently taxed at 10 per cent.
Chancellor Rachel Reeves announced in her autumn Budget that BADR would increase from 10 per cent to 14 per cent from 6th April this year, followed by a further 4 per cent increase from 6th April 2026.
Business Asset Disposal Relief is applicable to various disposals, including assets of a sole trader, interests in a partnership, trust assets, and shares in a private trading company.
Kim Klahn, a partner in the corporate team at Clarke Willmott in Birmingham, who has advised numerous owner managers on mergers and acquisitions, says the April increase will inevitably affect the retirement and reinvestment strategies of many business owners, prompting them to look at disposing of their company ahead of the change.
“There was speculation that BADR may even be abolished in the Autumn Budget so the CGT increases that have resulted are not as drastic as many had feared,” says Kim Klahn.
“We therefore expect to see increased activity among some owner managers wanting to take advantage of the current BADR rates in the first quarter of 2025. We also expect that a lot of people will be looking to invest their money following an exit – and this could boost deal activity from an investment and fundraising perspective.
“There may also be more interest from shareholdings selling into an Employee Ownership Trust, which is CGT exempt. Being aware of key dates in a deal is critical for tax purposes, so it is important for our clients to be aware of the incoming changes and when they will take effect.”
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