Budget 2016: The most tax efficient time in recent history to sell a business
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In a move that makes now the most tax efficient time in recent history to sell your business, Chancellor George Osbourne announced in his latest Budget that Entrepreneurs’ tax relief has been extended to include long-term investors whilst capital gains tax has been slashed by 8% for all business owners.
What are the benefits of selling now?
Entrepreneurs’ relief, which applies to business owners seeking to sell their business, continues to grant eligible owners a preferential capital gains tax rate of just 10% on business gains of up to £10 million; however this has only been guaranteed for the next 12 months. Additionally the rate of capital gains tax has been reduced by 8% on anything gained after £10 million.
Previously, individuals would have also been required to be employed within the firm and hold a stake of 5% or greater in order to claim a £10 million lifetime allowance at the reduced rate. However, under the new changes which are being referred to as “investors relief”, the provision has been extended to all long-term investors with shares in privately owned companies.
The announcement is good news for both buyers and sellers as it could potentially pave the way for a new type of mainstream investment, with investors now provided with a greater incentive to invest in SMEs and subsequently benefit from the rewards of a reduced tax liability. Mr Osbourne has suggested that the changes would “put rocket boosters on the backs of enterprise and productive investment”.