{"id":6080,"date":"2024-11-21T12:25:00","date_gmt":"2024-11-21T12:25:00","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=6080"},"modified":"2024-11-21T12:25:02","modified_gmt":"2024-11-21T12:25:02","slug":"succession-or-sale-the-case-for-selling-your-business-before-the-2026-inheritance-tax-changes","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/succession-or-sale-the-case-for-selling-your-business-before-the-2026-inheritance-tax-changes\/","title":{"rendered":"Succession or sale? The case for selling your business before the 2026 Inheritance Tax changes\u00a0"},"content":{"rendered":"

The Autumn Budget brought clarity to many areas of tax planning, but for family-run businesses, one announcement could prove particularly challenging.\u00a0<\/span>\u00a0<\/span><\/p>\n

From April 2026, businesses worth over \u00a31 million will no longer benefit from the long-standing exemption on Inheritance Tax (IHT) that has allowed families to pass down company ownership without incurring a hefty tax bill.<\/span>\u00a0<\/span><\/p>\n

Under the new rules, any business shares passed down will face a 20 per cent IHT charge on the value above \u00a31 million.<\/span>\u00a0<\/span><\/p>\n

For example, if your company is valued at \u00a310 million and the nil-rate bands have already been used, your heirs could face an IHT bill of \u00a31.8 million.<\/span>\u00a0<\/span><\/p>\n

With these changes on the horizon, many family business owners are asking the same question \u2013 should I sell my business instead of passing it on?<\/span>\u00a0<\/span><\/p>\n

Why selling may be the better option<\/span><\/b>\u00a0<\/span><\/p>\n

For decades, the IHT exemption for private company shares has made passing a business to the next generation an attractive option.\u00a0<\/span>\u00a0<\/span><\/p>\n

However, this change introduces cashflow risks for families, as they may need to find substantial sums to cover the tax bill.\u00a0<\/span>\u00a0<\/span><\/p>\n

This could prove especially difficult for businesses where the majority of value is tied up in assets, leaving little liquidity to settle IHT.<\/span>\u00a0<\/span><\/p>\n

Selling the business outright, rather than passing it down, eliminates this problem.<\/span>\u00a0<\/span><\/p>\n

It allows you to realise the value of your business now, securing your wealth in a way that can be distributed more flexibly and efficiently.\u00a0<\/span>\u00a0<\/span><\/p>\n

However, changes to Business Asset Disposal Relief (BADR) are set to take effect from April 2025, meaning that the tax advantages for business owners are gradually being reduced.\u00a0<\/span>\u00a0<\/span><\/p>\n

Currently, qualifying gains are taxed at a rate of 10 per cent on the first \u00a31 million, but this will increase to 14 per cent in April 2025 and 18 per cent in April 2026.\u00a0<\/span>\u00a0<\/span><\/p>\n

For example, a business sold for \u00a32 million today would incur \u00a3100,000 in tax under the current BADR rate.\u00a0<\/span>\u00a0<\/span><\/p>\n

By April 2026, that same sale could cost \u00a3180,000 in tax, assuming no other changes.\u00a0<\/span>\u00a0<\/span><\/p>\n

These incremental increases may not seem dramatic at first glance but can have a substantial impact on the final amount retained by you and your family.<\/span>\u00a0<\/span><\/p>\n

With changes not set to come in until April, there is still a limited window to take advantage of the more favourable rate before the relief tapers off.<\/span>\u00a0<\/span><\/p>\n

Planning your exit strategy<\/span><\/b>\u00a0<\/span><\/p>\n

If selling your business is the right choice for your circumstances, careful planning will be key to achieving the best outcome.\u00a0<\/span>\u00a0<\/span><\/p>\n

Buyers will be looking closely at how your business is adapting to broader challenges such as rising labour costs, increased Employers\u2019 National Insurance, and inflationary pressures.\u00a0<\/span>\u00a0<\/span><\/p>\n

Preparing financial forecasts and demonstrating how your business can remain resilient will help secure a favourable valuation.<\/span>\u00a0<\/span><\/p>\n

For further advice on managing the sale of your business in light of these changes, please speak to our team today.\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The Autumn Budget brought clarity to many areas of tax planning, but for family-run businesses, one announcement could prove particularly challenging.\u00a0\u00a0<\/p>\n","protected":false},"author":2,"featured_media":6083,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,125],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6080"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=6080"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6080\/revisions"}],"predecessor-version":[{"id":6081,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6080\/revisions\/6081"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/6083"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=6080"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=6080"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=6080"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}