Following Labour's recent election victory, business owners over 50 years old are scrambling to sell their businesses amid fears of an impending hike in capital gains tax (CGT).
According to research conducted by the University of Warwick and the London School of Economics, nearly three-quarters of those who benefit from capital gains in Britain are over the age of 50. Furthermore, 68% of all taxable gains covered by CGT come from the sale or liquidation of businesses. This demographic faces a significant financial threat under the proposed tax changes.
The analysis shows that men are particularly at risk, receiving 74% of the UK's capital gains by value. This has prompted a rush among older male business owners to sell before the tax changes take effect, fearing that Labour's policies could severely impact their financial returns.
Labour's Chancellor, Rachel Reeves, is considering raising CGT as one of the few available options to fund the party's plans. Although Labour has ruled out increasing income tax, National Insurance, VAT, and corporation tax, it has not dismissed the possibility of a CGT hike. This prospect has generated considerable concern among older business owners.
Capital gains tax applies to profits made on the sale of personal assets, such as shares or property, valued at £6,000 or more. Last month, The Guardian reported that Labour is considering a wealth tax package, including a CGT rise that could generate an additional £8bn for the Treasury. Although Labour has emphasized growth over tax increases, analysts believe the new government will likely need to raise taxes due to financial pressures.
Prime Minister Keir Starmer has ruled out imposing CGT on primary home sales, maintaining its current exemption. However, he has not provided further assurances against other assets, including shareholdings. Chancellor Rachel Reeves has previously advocated aligning CGT rates with income tax rates, which would significantly increase the tax burden on business owners upon sales, and possibly also on death in the future.
The University of Warwick and LSE's research, based on anonymized tax returns from 2015 to 2019, highlights the substantial impact that a CGT increase could have on older business owners, driving the current rush to sell before the potential tax changes are implemented.
How Can Qubic Help?
To navigate these potential changes, Qubic offers tailored tax planning services. Our expertise can help mitigate the impact of higher taxes and leverage current reliefs effectively. The window of opportunity to leverage current tax rates and reliefs is narrowing, and the time to act is now.
We understand that the uncertainty surrounding tax changes can be challenging, and we are here to help you.
For more information on our tax planning services and to discuss your options with one of our team, simply click the link below:
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