In the aftermath of the autumn budget there have been some significant changes to the way that Members’ Voluntary Liquidations will be dealt with.
The announcement by The Chancellor of the Exchequer, Rachel Reeves, on 30 October 2024 has changed the rates of both Business Asset Disposal Relief (BADR) and Capital Gains Tax.
While the changes will have an affect, MVL’s will continue to offer a more tax-efficient method as an exit route for company directors. However, time is of the essence to make the most of an MVL before the changes take effect.
What are the key changes?
Increase in Capital Gains Tax (CGT) Rates – the CGT rates are set to rise from 10% to 18% for the lower rate taxpayers and from 20% to 24% for higher rate taxpayers. There have been no changes to the Annual Exempt Amount (AEA) of £3,000. This increase brings the CGT rates closer to that of the income tax rates but does still provide significant incentive to encourage entrepreneurs to invest in their business.
Business Asset Disposal Relief (BADR) – The capital gains rate available under BADR will be increasing from 10% for the current financial year to 14% in April 2025 and then to 18% in April 2026. The lifetime limit of £1m is unchanged.
Currently BADR offers a highly tax efficient way for disposals though an MVL, given that the disposal qualifies. However, while this will still offer a more tax efficient method with these changes over the next couple of years the tax savings will be reduced.
If you are thinking about an MVL, or would like more information on the upcoming changes, please get in contact with us.
