Is a Capital Gains Tax Hike on the Cards?

After finding a “black hole” in the treasury’s coffers, new Prime Minister, Kier Starmer warned that the next budget would be a “painful” one.  Understandably, this has sparked concern among many as to what that may mean for them.

Chancellor of the Exchequer, Rachel Reeves, has ruled out any rises in National Insurance, VAT, personal income taxes, and Corporation Tax. This leaves few options left for the government to recoup some of the £22bn shortfall. Among those limited choices available, though, are taxes aimed at businesses and personal wealth. Starmer has already insisted that it will be those “with the broadest shoulders” that will be tasked with bearing this economic burden, so it seems as if these will be where the ‘pain’ in the budget will lie.

So far, there haven’t been any leaks that can give us an indication of what will be changed, but it has been heavily speculated that Capital Gains Tax will be one of those to be altered.

Upsetting the least amount of people

A rise in Capital Gains Tax makes a lot of sense from the chancellor’s perspective. Not only was CGT responsible for accruing over £14bn during the 2022/23 tax year, but it also affects relatively few people. Just 369,000 people paid Capital Gains Tax during the same period. For a fledgling government still keen on making a good impression, upsetting the least amount of people must be a priority.

To this end, there is also scope to keep to manifesto pledges of not raising taxes. Capital Gains Tax has allowances that can be cut, and thresholds that can be altered to avoid the government technically raising taxes. Whether that would go any way toward placating those affected by such a change, however, is another matter.

“Those hoping to sell their company now face an uncertain few weeks”

Stick or twist?

Business owners that have been considering selling their company, now have a difficult decision to make. Do they try to sell quickly now, in the hope of avoiding a costly change to CGT, or do they wait for the best price possible, gambling in the process that no changes will be announced?

Founder and Managing Director of Forbes Burton, Rick Smith, sympathises with those facing such a decision, “the government’s talk of relying on the broadest shoulders, has spooked some business owners”, he said. “Those hoping to sell their company now face an uncertain few weeks as its difficult to know what to do for the best.

“Of course, Capital Gains Tax applies to any assets that a profit has been made on. So, any business owners selling land, premises, shares, trademarks, or machinery will be anxiously awaiting the August Budget to see where they stand”.

With no leaks coming out of Westminster, it’s impossible to provide solid advice on whether a quick sale is prudent or not. Because there are so few other options available to the chancellor though, a rise in Capital Gains Tax would be far from a surprise to most.

Thinking about selling your business?

We may not be able to say for certain what the upcoming budget may have in store, but our experienced team are able to navigate the complex world of business sales on your behalf.

Forbes Burton have access to a network of thousands of active investors looking for new businesses to buy Not only can we put your company in front of the right people though, we can also help you to prepare your business for sale so it can achieve a better price. Call us on 0800 975 0380, or email [email protected] for a free consultation to see how our expertise can help you to sell your business on your terms.