Winds Of Change

 With the election of a new Labour Government, the outcome may not have surprised many, though the substantial majority might have exceeded expectations. But does this signify a journey towards the sunlit uplands?

The stock market often serves as a reliable indicator of public sentiment, and as I write, the FTSE shows a slight decline. This lukewarm response suggests an underlying apprehension about the future. Indeed, regardless of the electoral outcome, the incoming administration faces a myriad of challenges, which contributes to a general sense of anticlimax.

The agenda for the new government is daunting, featuring priorities such as stimulating economic growth, managing national debt, avoiding tax increases, and maintaining low mortgage rates. The fiscal pressures are undeniable, and despite Labour’s assurances against raising income tax, National Insurance, and VAT, they have remained silent on potential changes to capital gains tax (CGT).

It is plausible that Labour may target CGT exemptions and reliefs, including Business Asset Disposal Relief (BADR). Previously known as Entrepreneurs’ Relief until April 6, 2020, BADR allows a 10% tax rate on qualifying asset gains, with the current limit set at £1,000,000, down from a previous cap of £10,000,000. There is speculation that BADR could be abolished entirely.

In November 2020, the Office of Tax Simplification (OTS) released the first of two government-commissioned reports. There were a number of recommendations including the replacement of BADR with a retirement-focused relief. This suggestion underscores the potential vulnerability of BADR under the new administration.

Recommended Actions

If you stand to benefit from BADR, potentially saving substantial tax amounts, it may be prudent to consider strategic actions now. This could involve de-risking by contemplating a sale or partial sale of your business—a topic we have previously discussed in our communications.

Should you wish to explore your options further, please do not hesitate to get in touch. We are here to provide a comprehensive explanation of the various strategies available to you.

As always, our initial consultation is complimentary.