Having already been in power for a month following a landslide general election, the new Labour government has now set the date for its first Autumn Budget. Last week, Chancellor Rachel Reeves announced that the Autumn Budget 2024 will take place on the 30th October 2024. This announcement follows a damning statement in response to a government spending audit, in which Reeves claimed that public finances were in a dire state following years of £22bn underfunded spending from the previous government.
With such a huge deficit to overcome to fund many of the promises outlined in the new government’s manifesto, one of the main aims of the Autumn Budget 2024 will undoubtedly be recovering some of the shortfall. There are a number of ways that the government may achieve this which will be confirmed when the Budget is officially announced in October, but it looks likely that we will see tax rises which may pose a significant risk to any business not adequately prepared.
What We Know So Far
The government can typically alleviate budgetary pressures in two key ways: cutting public spending and increasing taxes for individuals and/or businesses. While we have already seen public spending cuts in areas such as Winter Fuel Payments, the Chancellor has also countered these cuts with newly announced pay rises for public sector workers including Junior Doctors and Teachers.
In its election manifesto, the Labour government promised that there would be no rises to income tax, National Insurance, corporation tax or VAT to fund its public spending initiatives. If the government is to stick to this key promise, both the £22bn shortfall and proposed public spending will thus need to be funded in other ways. It is therefore widely predicted that the government will raise taxes on the next level of Treasury revenue, namely Capital Gains Tax, Inheritance Tax and business rates.
The Autumn Budget 2024 & Capital Gains Tax
Out of all of the speculated tax rises on the horizon in the upcoming Autumn Budget, it is the possible changes to Capital Gains Tax that will be of most concern to many company directors and business owners.
When assets are sold or a business is closed, Capital Gains Tax is paid on any profits extracted. Currently, the rates of this tax are much lower than the rates of income tax usually charged to a business. Businesses may also benefit from Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) when extracting profits via solvent liquidation. This form of tax relief reduces Capital Gains Tax to 10% when qualifying criteria are met and profits are extracted as part of the Members Voluntary Liquidation (MVL) process.
If the government is to look towards these areas to address the £22bn overspend, it is likely that Business Asset Disposal Relief could be cut and Capital Gains Tax rates could be increased in line with income tax rates. Should such changes be announced in the Autumn Budget 2024, those wishing to sell their business or embark on the solvent liquidation process would therefore find themselves paying considerably more tax when doing so.
How Can UK Businesses Prepare?
While we cannot confirm exactly what changes will be made to Capital Gains Tax rates until the Autumn Budget 2024 is announced by the Chancellor in October, businesses will understandably want to prepare for any tax hikes that could be put into place.
If you are concerned about the possibility of changes to Capital Gains Tax and/or Business Asset Disposal Relief, it may be worthwhile considering whether you would like to withdraw profits from your business now. By considering an MVL now, you could extract capital from your business and benefit from Business Asset Disposal Relief before any changes come into play as a result of the Autumn Budget.
At Ballard Business Recovery, we have years of experience helping business owners benefit from the tax implications of the MVL process and pride ourselves on our proven ability to make this process simple and efficient. If you would like to find out more or get more information about how an MVL and Business Asset Disposal Relief can help you make the most of your hard-earned funds, our expert team can help. Be proactive and contact us ahead of the Autumn Budget 2024.
