Budget 2024 – Time to sell your business before 5th April 2025?

Budget 2024: is it time to sell your business?

On 30 October 2024, the chancellor announced various changes to the tax regime. Amongst those were changes to the Capital Gains Tax (GCT) rates being paid on disposal of assets.

If you own a business and have decided that now you would like to exit, could you sell before the CGT rates increase?

What were the changes in the Budget?

The standard rate of GCT was raised from 20% to 24% immediately after the Budget.

Business Asset Disposal Relief, previously known as Entrepreneur’s Relief (BADR) has kept the £1m lifetime allowance, however the rate increases from 10% to 14%, effective 6 April 2025.

Do I qualify for BADR?

It depends on what you are selling. To qualify for BADR, see the below taken from HMRCs website:

1. If you are selling part or all of your business to qualify, both of the following must apply for at least 2 years up to the date you sell your business:
   1. you’re a sole trader or business partner; and
   1. you’ve owned the business for at least 2 years
2. If you’re selling shares or securities to qualify, both of the following must apply for at least 2 years up to the date you sell your shares:
   1. you’re an employee or office holder of the company (or one in the same group)
   1. the company’s main activities are in trading (rather than non-trading activities like investment) – or it’s the holding company of a trading group

So could I complete a sale before 5 April 2025?

In short, the answer is yes.

Generally, if you have agreed the terms of a sale with a Buyer with finances in place then you should have ample time. Three months from signing of Heads of Terms to completing the sale is a realistic timeframe. 

If you have not yet agreed, it is less likely that you could realistically complete a sale before the rates increase.  

You should consider the deal as a whole.

The amount of tax you are paying is important, but it is not everything. There could be an increase in the number of businesses being offered for sale between now and 5 April 2025. This might strengthen the bargaining position of potential Buyers who may push for more favourable terms in exchange for hitting the 5 April deadline. This might include:

• a reduced purchase price;
• paying less money paid upfront;
• deferring a greater proportion of the purchase price;
• the Buyer insisting on more buyer protection in the warranties. 

So whilst it desirable to take advantage of the reduced rates, it might be that in trying to secure a deal to complete before the increase, you end up receiving less for your shares/assets.  

You could always consider a sale to an Employee Ownership Trust (EOT).

We have more information available on our website on this. The budget has not affected their tax treatment. There is still a 100% CGT relief on the sale of shares to a qualifying EOT. 100% relief. No CGT. This could potentially give you a much better tax outcome, and give the time to plan a sale on the most appropriate terms, without rushing to hit a deadline.

---

This article provides a general commentary and is not intended to be comprehensive. You should always seek specific legal and financial advice in relation to the specific facts of proposed sale.

If you want to discuss any of the pints raised in this article, get in contact with any member of our team.