Uncertain future of Entrepreneurs’ Relief

In the upcoming budget on March 11, the government is likely to axe Entrepreneurs’ Relief to cover the public spending bill.

The move has been widely criticised by the Federation of Small Businesses and business owners, who are concerned that scrapping the relief would send a message that Britain is “not open for business”.

But, what is the Entrepreneurs’ Relief?

Under the current regime, the entrepreneurs’ relief allows entrepreneurs selling their business to pay capital gains tax at a reduced rate of 10%, instead of the usual rate of 20%.

The relief comes with a lifetime limit of £10 million, which means that it can be applied multiple times, provided the claims are within the above threshold.

Should it be scrapped?

Unfortunately, because of this generous lifetime limit, the entrepreneurs’s relief is often branded “tax relief giveaways to wealthy”. Where, in fact, the scheme is mostly used by everyday entrepreneurs who have built their businesses as the retirement plan.

Thus, not scrapping but the reform of the scheme and introduction of a £1 million cap that would align it with the pension pots limit, would be a more desirable outcome.

What will the change mean to entrepreneurs?

With so much uncertainty surrounding Entrepreneurs’ Relief, those who are concerned about upcoming changes to the tax break should seek advice as soon as possible.

If you have any questions about exit strategy, MVL or entrepreneurs’ relief, please contact us for a free, impartial consultation.

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