Capital Gains Tax

Planning for a business sale must start early to give the most effective solutions. With the right offer, most business owners would sell tomorrow, so the time to start planning is now.

The flat rate capital gains tax charge is 28% for higher rate tax payers and 18% for others. The principle reduction available is known as ‘entrepreneurs’ relief’, under which £10 million of capital gains is effectively taxed at a rate of 10%, rather than 28% or 18%.

The key features of the relief include:

  • it is a lifetime allowance of £10 million, so that gains realised at different times may be eligible for relief; 
  • it applies only to individuals; 
  • the disposal must represent a ‘material’ disposal; for shares, 
  • the individual must own 5% and be an employee/officer and it must be a trading company or group; 
  • the asset must have been held for a minimum of 1 year. 

As with all tax planning, care must be taken to ensure that ‘entrepreneurs’ relief’ is available.

If you hold non business assets, such as a second home or a holiday home, there are fewer reliefs to minimise tax, but timing of disposal is an important tool to minimise and delay tax.