Preparing for Financial Changes

I, like many, anticipate the General Election will happen this Autumn, with the latest possible date being December 17th, 2024. All signs point in this direction, as it’s likely the government will wait for better news later in the year.

Regardless of who wins the election, it’s highly probable that the tax burden will continue to rise. According to numerous polls, the Labour Party is currently leading. However, the need for increased taxation remains a common theme. Taxes have been steadily increasing through various means, and this trend is likely to persist whoever wins.

The nation’s financial situation remains precarious, as highlighted by a recent Grant Thornton study indicating that 40% of councils are at risk of financial failure over the next five years. This underscores the urgent need for reform in local government finance. To maintain services, something must change, and this may involve the removal of valuable tax reliefs as central government looks to provide more financial support.

As a business owner, you should consider the possibility of a new administration altering Business Asset Disposal Relief, or “Entrepreneurs’ Relief.” As it used to be known.

Currently, you can claim up to £1 million in Business Asset Disposal Relief over your lifetime, with a 10% Capital Gains Tax rate on qualifying asset gains.

It’s not difficult to imagine this generous benefit being reconsidered as policymakers seek ways to bolster the Treasury’s finances. While the current Chancellor may not make significant changes to business benefits in a pre-election budget, a change of government may lead to different decisions.

If Labour wins the election, their “Start Up Scale up” policy aims to make Britain the best place to start and grow a business. However, it’s doubtful this will result in improvements to tax relief on sales. A reform in this area is likely under any new government.

The Office of Tax Simplification (OTS) has produced government-commissioned reports on the future of asset disposal relief. Going forward, we may see simplified taxation bands with an emphasis on supporting business startups rather than providing relief upon sales. In my opinion, Business Asset Disposal Relief might eventually be replaced with a relief focused on retirement. We will closely monitor developments in this area throughout the year.

For financial advisors looking to retire or dispose of parts of their business, there are still attractive prices available, as buyers seek high-quality IFAs. We have interested acquirers with funds ready to purchase businesses of all sizes, including clients you may no longer wish to administer. In the past we’ve done deals involving as few as 30 clients.

As a leading independent consultancy in the retail financial services sector, we are well-equipped to assist you in exploring all your options. If you have specific taxation questions related to a business sale, we can connect you with firms that specialise in addressing your needs.