Chancellor Rishi Sunak is considering proposals for changes to CGT from the Office of Tax Simplification as he looks to raise funds in the wake of Covid-19. Small business owners could face the biggest hit. Sunak is widely expected to align CGT rates much more closely with the income-tax system. Where most taxpayers currently pay CGT at a rate of 20% – falling to 10% for basic-rate taxpayers – higher- and additional-rate taxpayers are charged 40% and 45% respectively on their incomes. Doubling CGT rates could bring in billions.
An additional worry for small business owners is the mooted abolition of Entrepreneurs’ Relief, under which founders pay CGT at only 10% when selling their companies. While the value of this relief was reduced in March, with entrepreneurs now subject to a lifetime limit of £1m of capital gains compared with £20m previously, abolishing it altogether would still cost some owners dearly.
The impact of the CGT changes could be considerable. An additional-rate income-taxpayer selling their business today for £5m would pay £900,000 of CGT, taking into account Entrepreneurs’ Relief and a 20% CGT rate. Abolishing the relief and aligning CGT and income-tax rates would see this bill rise to £2.25m.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Selling a company simply for tax reasons may not appeal to many entrepreneurs. However, for business owners who had already been mulling a sale, it may make sense to accelerate the process.
-
How to boost your pension by £33,000 by paying it an annual Christmas bonusContributing an extra £400 into your pension pot this festive period will give the gift of compound interest and should make your retirement feel more jolly and bright
-
Japan’s medium-sized stocks provide shelter from trade warsNicholas Price, portfolio manager of Fidelity Japan Trust, tells us where to invest in Japan
-
Business rates relief to be slashed – how to cut costsLabour has promised to reform business rates, the corporate equivalent of council tax
-
Rouble hits two-year low against the dollar – what does it mean for Russia's economy?New US sanctions have plunged the rouble to its lowest level since 2022. Why are investors spooked and how will this affect Putin's economy?
-
Has Javier Milei succeeded in transforming Argentina's economy?Javier Milei won an election last year on an “anarcho-capitalist” platform, promising to take a chainsaw to the overbearing and bloated state. How’s it going?
-
Brazil booms – but why do investors remain wary?Brazil is booming, but you wouldn’t think so from looking at the stock market. What's behind the market paranoia?
-
How small businesses can take advantage of new sources of financeSmall business Banks have reduced lending to small companies, but there are alternatives as the finance market continues to evolve
-
Do we need central banks, or is it time to privatise money?Analysis Free banking is one alternative to central banks, but would switching to a radical new system be worth the risk?
-
Will the R&D tax credit change in the Autumn Budget?Will Labour revise state help designed to foster R&D in the upcoming Autumn Budget?
-
How to improve economic output using the supply-side approachBoosting potential economic output through public investment is crucial, says David C. Stevenson
