Fears over capital gains tax hike push business owners to sell up

The number of business owners who fast-tracked selling their companies over the past year has increased due to fears around a possible tax raid in the Budget.

According to professional services firm Evelyn Partners, 29 per cent of business owners accelerated their plans in the past year, up from the 23 per cent who did so 18 months ago.

The survey showed that 23 per cent of business owners who had fast-tracked their exits did so because they were worried about a capital gains hike.

A further 20 per cent fast-tracked their plans due to rumoured changes to inheritance tax, which could make it more costly to pass on a business.

The government is widely expected to hike taxes in October’s Budget in an attempt to put the public finances on surer ground, with speculation mounting that Chancellor Rachel Reeves will hike capital gains tax and inheritance tax.

Capital gains tax is a levy raised on the increase in value of an asset between the points of purchase and sale.

The rate varies depending on the asset concerned, but rates are much lower than the highest rates of income tax.

Some think tanks have suggested aligning the two rates, although Treasury analysis suggests that this could actually cost the Exchequer by discouraging transactions.

Evelyn Partners’ survey adds to a growing pile of evidence that the number of sales has increased over the past few months in an attempt to dodge any increase in capital gains.

HMRC’s figures showed that the Treasury pocketed £197m through capital gains tax in August, the highest for August since at least 2008.

A number of changes have also been rumoured for inheritance tax, such as reforming reliefs on the inheritance of unlisted businesses.

The reliefs allow businesses to be passed from generation-to-generation. According to the Institute for Fiscal Studies (IFS), abolishing the relief would raise £1.4bn.

“Speculation is rife that the Chancellor will curtail Business Relief which can help to soften burdensome IHT liabilities and we have had conversations with many business owners who want to fast-track succession plans while this valuable relief is still available,” Laura Hayward, a tax partner at Evelyn Partners said.