A south coast law firm has begun processing what it believes will be a frenzy of activity as business owners and other clients seek to close deals before further changes to Capital Gains Tax (CGT) kick in.
Business Law experts at Ellis Jones Solicitors say a huge spike in instructions they received ahead of the autumn Budget ‘is not over yet’.
Their caseload peaked during October amid efforts by owners, directors and investors to fast-track exit plans and sales of chargeable assets to avoid paying higher rates of CGT.
But as well as raising rates now, the Chancellor announced in her Budget speech that there will be changes to Business Asset Disposal Relief (BADR), previously Entrepreneurs’ Relief, from April 2025, triggering a comparable countdown to what will be another ‘cliff edge’ moment.
Neil Cook, Partner & Head of Business Services at Ellis Jones, said:
“The lead-up to the Budget was extremely busy for us as people sought to close deals before the much-anticipated rate hikes took effect, but it’s not over yet.
“While we have just proved we can deal with multiple transactions within tight deadlines, we now expect a further deluge of work to come in before the cliff edge of next April because of changes to BADR.”
CGT is a tax charged on financial gains from the sale, disposal or transfer of assets such as company shares, second homes and certain other possessions.
The Chancellor used the Budget to put a time limit on the lower 10% CGT rate payable through BADR mitigation on gains from qualifying assets up to a £1 million lifetime limit.
From 6 April 2025, she said the rate will go up to 14% and a year later, in April 2026, it will rise again to 18%.
Neil said:
“Under BADR now, if you have a £1 million gain from a qualifying business asset to dispose of, you will pay 10%, so £100,000.
“Following the Chancellor’s announcement, if the deal takes until after 6 April 2025 to finalise, you will pay 14%, so £140,000, an increase of £40,000. If we’re looking at the year after, it will be £180,000, so an extra £80,000 compared to now.
“That is on top of the rise in the headline CGT rate to 24% announced in the Budget for non-basic rate taxpayers.
“We have already seen that hike cost one of our clients hundreds of thousands of pounds in extra tax payments regarding a disposal.”
Members of Ellis Jones’ Business Services department work from the firm’s offices in Dorset and London.
Neil’s Business Services colleague and fellow Ellis Jones Partner Wayne Spolander said:
“Lots of clients took advantage of our services and were wise in their early planning ahead of the Budget changes.
“This successfully enabled them to complete deals or sell their businesses for gains in excess of £1 million at the previous rate of 20%.
“The Chancellor didn’t remove BADR but is going to increase the amount that people will have to pay in CGT starting from next April.
“As a result, we anticipate many more clients seeking help in the meantime so they can prepare for that and save on their tax bill.
“We are ready, willing and able to help on the legal side, while always recommending that clients speak with a tax expert or accountant for the best tax advice around CGT.”
For more information on Ellis Jones’ Business Services, visit www.ellisjones.co.uk.