There are talks of potential changes to capital gains tax in October’s upcoming Budget announcement (Wednesday 30th October).

Recent comments from Keir Starmer suggest that capital gains tax (CGT) could see an increase in next month’s “painful” budget. Starmer hinted at impeding tax rises to plug “a £22bn black hole” in the public finances.

Capital gains tax is a charge on the profit made from the sale of assets that have increased in value. This can include second homes, business shares and investments, and is paid by individuals and business owners.

Whilst the new Labour manifesto made promises not to increase income tax, national insurance, VAT and corporation tax, there was no mention of CGT.

What is capital gains tax?

Capital gains tax is the tax you pay on any profit when you sell or ‘dispose of’ all or part of an asset that’s increased in value.

Whilst some assets are tax free, it’s not the amount of money you receive that’s taxable, it’s the gain you make. For example, if you purchase a business for £1,000,000 and sold it later for £1,500,000, you’ve made a gain of £500,000. The £500,000 is taxable.

As a business owner, assets you may need to pay tax on include:

• Fixtures and fittings
• Land and buildings
• Plant and machinery
• Shares
• Registered trademarks

You wouldn’t usually need to pay capital gains tax on gifts to your marital partner, civil partner or charities.

What would an increase in capital gains tax mean for business owners?

The labour government have outlined that ‘difficult decisions’ need to be made, with several reports suggesting that serious consideration is being given to increasing capital gains tax.

This means taxpayers may see an impact, whilst entrepreneurs and farmers are likely to be amongst the hardest hit if the government introduce a policy like this.

For business owners who are considering selling their business, for example if you’re wanting to retire and sell the business to a third party, you might pay more tax on your profits after the October Budget as oppose to if you were to sell your business prior. Proposed changes could be introduced immediately, so it’s important to plan ahead.

Other possible changes to CGT in October’s Budget may include:

• Abolition of the £1m business asset disposal relief limit/entrepreneur’s relief. This reduces the rate of CGT on disposals of businesses or business assets from 20% to 10%.
• A tax on lottery and gambling wins.
• Removal of the CGT exemption for “wasting assets” such as classic cars and wine.

How can PMD support you?

Considering selling part or all of your business prior to the implementation of these changes? Or looking to acquire another business? We can support you in terms of funding the opportunity. Our structured finance team have experience working on complex transactions, acquisitions and MBOs/MBIs. And they’re here to help!

If you have concerns about how these changes may impact you and your business, we can put you in touch with our network of trustworthy advisors. Our structured finance team have long-standing relationships with several well-respected accountants, tax advisors and professionals.

Looking for something else? Here at PMD, we offer a full service offering of flexible finance solutions to support your business requirements. Whether that’s looking at growth and expansion plans, ways to boost working capital or investing in new property. Keep up to date with our latest activity and see how we support our customers by visiting us on LinkedIn.