Business Asset Disposal Relief (BADR) – Budget 2024

Post-October 2024 Budget: Income Tax Threshold – What Does It Mean for You?

The recent UK Budget has brought about key changes to income tax thresholds that could impact your earnings, particularly when it comes to Business Asset Disposal Relief (BADR). This article outlines the updated income tax rates and thresholds, focusing on how these adjustments may affect your business assets, and offers practical tax-saving tips to help you manage these changes effectively.

Business Asset Disposal Relief (BADR)

This can be claimed on qualifying business asset disposals such as when you close a company. To qualify, certain conditions must be met:

  • The company must be a trading company
  • You must have held at least 5% of the shares for at least 2 years
  • The distributions must be made within 3 years of the ‘cessation of trade’

The relief currently reduces the CGT rate on the gain to 10% for all taxpayers. From April 2025 the rate will rise to 14% and from April 2026 it will be 18% (to match the rate that will be payable by basic rate taxpayers on all capital gains).

Tax tip

  • If you were thinking of closing your company and have accrued significant reserves, you may wish to close early to secure BADR at the lower rate. For every £10,000 of taxable gain, the 4% tax increase will give rise to additional tax of £400.
  • Note that it is the date the distribution is made that determines the tax point, and the distribution is made when the funds are transferred to your personal bank account. This would be when you withdraw the funds from the business bank account following cessation, or when you receive the distribution from the liquidators.
  • If you opt for a members’ voluntary liquidation, because reserves are more than £25,000, you will need to allow time for the liquidators to obtain the necessary clearances before the distributions can be made. This typically takes 4 to 8 weeks for the first distribution which is normally 85% -90% of the total funds.

 

Unlock the Full Potential of the Budget with Competex:

The budget has introduced some significant changes. At Competex, we break down the key changes and provide advice on how to use them to your advantage. Whether it’s for your personal taxes or business planning, we’re here to help you navigate the complexities.

For further information, please contact us at info@competex.co.uk or visit our website at https://www.competex.co.uk.

 

Explore Related Insights

To better understand the recent budget changes and their potential impact on your business, we recommend exploring the following articles:

 

Author: Kavit Sethi
Published on: