London, UK - October 28, 2024 - As the UK prepares for the Labour government’s Autumn Budget 2024, entrepreneurs and business owners are closely watching for potential changes that could significantly impact their future financial plans. With thousands of retiring business owners considering selling their companies, the budget is expected to bring reforms that could reshape the entrepreneurial landscape, particularly in relation to tax policies and business sale incentives.

Key Speculations Around Tax Reform

Financial commentators are predicting significant changes to Capital Gains Tax (CGT) and business-related tax reliefs. Of particular concern to entrepreneurs is the potential increase in taxes on capital gains. One of the most critical points of discussion is the future of Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief, which currently applies discounted Capital Gains Tax of just 10% to a lifetime maximum allowance of £1m from the sale of an owner-operated company. This relief has been instrumental in reducing the tax burden for retiring business owners selling their businesses. While the previous Conservative government reduced the BADR threshold from £10 million to £1 million, many were hopeful that Labour might restore it in part which could ease the financial transition for retiring entrepreneurs. However, early reports suggest the Chancellor may be considering scrapping BADR entirely, which would be a huge blow for UK business owners.

BizCrunch’s research has identified a potential annual fiscal impact to the UK Treasury exceeding £100bn, in the event that all the UK companies seeking to sell are unable to and instead liquidate due to lack of succession.

Retirement Wave Driving Demand for Favourable Tax Conditions

Over 100,000 UK businesses, each with >£1m annual revenues and independent owners aged 60+, are expected to enter the market as their owners approach retirement in the coming years. For these entrepreneurs, selling their businesses represents not just a financial decision but a culmination of years of hard work and sacrifice. Any increases in taxes on these sales could significantly impact both the value of the businesses and the financial security of the owners.

The UK already lags behind other developed-world nations in the proportion of established companies that are acquired in an average year.    Reducing the incentives to exit may further reduce woefully-low levels of British M&A deals – typically less than 2,000 SMBs in a 12-month period.

Favourable tax conditions will be crucial to ensuring a smooth transfer of ownership and enabling retiring business owners to exit their companies without undue financial stress. Additionally, punitive tax increases could defer business sales, reduce liquidity, and hinder the next generation of entrepreneurs.

Balancing Taxation and Economic Growth

Heavier taxation on business sales may have broader economic consequences. When business owners sell, they often reinvest their capital into new ventures, stimulating growth and job creation. In fact, this is incentivised via the EIS and SEIS schemes which allow capital gains to be deferred or offset, in return for taking significant risks by investing in startups when they are at their most vulnerable. If the tax burden becomes too high, however, entrepreneurs may delay sales or avoid these schemes altogether, leading to reduced liquidity and slower economic growth.

Restoring Business Asset Disposal Relief towards its previous £10 million lifetime threshold would be a significant step in supporting both retiring entrepreneurs and the broader economy, encouraging reinvestment and fostering innovation across the UK.

BizCrunch: Supporting Entrepreneurs in Transition

As business owners navigate these complex changes, BizCrunch is committed to providing expert guidance for entrepreneurs buying or selling businesses.  Specialising in offering tools, advice and practical solutions that enable SMB Succession through M&A.

Looking Ahead to the Autumn Budget 2024

The Autumn Budget 2024 represents a critical moment for the UK's entrepreneurial community. Retiring business owners and budding entrepreneurs alike will be affected by the forthcoming tax reforms. BizCrunch remains ready to help clients adapt to these changes and ensure successful business transitions.

For more information or expert advice, visit BizCrunch.

Media Contact:

Alfie Lambert

Cofounder

BizCrunch

07541 644690

al@bizcrunch.co

www.bizcrunch.co

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