Changes to Business Asset Disposal Relief (BADR) could leave advisers £30,000 worse off when they sell their business, warns Clifton Wealth Partnership.
In his inaugural Budget on Wednesday, Chancellor John Healey announced plans to halve the lifetime limit for BADR from £1 million to £500,000.
While the government said there will be no change for three quarters of BADR claimants, Anthony Carty, managing director of Clifton Wealth Partnership, said the reduction may impact advisers.
The higher rate of capital gains tax is charged at 24%, but the BADR reduces the rate to 18% for those selling their businesses. That used to be on the first £1 million of profit, but it is being reduced to the first £500,000 of profit in April 2027. That means the second £500,000 of profit will no longer receive the relief, so an extra 6% of tax on that £500,000 will cost £30,000.
Carty said: “The lifetime limit for Business Asset Disposal Relief is being halved, which may have an impact on those looking to sell their businesses.
“With less than six months to go until the Relief is halved, some business owners may be tempted to rush to get their deals over the line before the change in April. While £30,000 is a meaningful sum, it isn’t a reason to sell a business you’re not ready to sell or rush through a deal that needs a lot of care and attention.”
Carty said advisers in a rush to beat the April change risk getting a weaker price or terms that don’t suit them, their employees or their clients.
Carty added: “A dent in the valuation can easily cost more than the tax you were trying to save. It’s important to point out it’s a lifetime limit, which means owners who’ve claimed the relief before need to check how much of it they’ve used, because previous claims will count towards the new, lower limit.”
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