What changes were announced in the Autumn Budget?
The Autumn Budget, which was announced on 30 October 2024, included a raft of tax changes designed to fill the £22 billion black hole in the public finances. Among them was an increase in Capital Gains Tax and the rate of CGT available under Business Asset Disposal Relief.
Capital Gains Tax has increased from 10% to 18% for basic-rate taxpayers and 20% to 24% for those paying at the higher rate with immediate effect.
Business Asset Disposal Relief (BADR) reduces the rate of Capital Gains Tax payable on qualifying assets to 10% and will continue to do so for the rest of this financial year. From April 2025, the CGT payable under BADR will rise to 14%, followed by 18% in April 2026.
Although the tax rates have changed, the Annual Exemption Amount for CGT will stay at £3,000. That means there’s no tax payable on capital gains up to that amount. There’s also no change to the BADR threshold, so you can continue to claim up to £1 million in Business Asset Disposal Relief over your lifetime.
What do the changes mean for Members’ Voluntary Liquidations?
If you want to close a solvent limited company with significant retained profits, a Members’ Voluntary Liquidation allows you to extract those funds tax-efficiently. Even after the changes, an MVL is still the most tax-efficient closure method, but you will benefit by acting quickly.
The rate of Capital Gains Tax you pay on the funds you extract from your company has already increased. However, the phasing in of the BADR changes means you still have a window to reduce your CGT liability to just 10%. That represents a big saving on the 24% CGT that higher-rate taxpayers now pay.
The first phase of the BADR changes does not come in until April 2025, so you can make significant savings on distributions before that date – but the clock is ticking. Even if you don’t make the April 2025 deadline, you’ll still pay significantly less tax on qualifying assets if you liquidate by April 2026.
Don’t Fall Foul of Unqualified AdviceClosing a solvent company after the Autumn Budget
The right closure method for you will depend on the value of the retained profit you have in the company. If your net assets are less than £25,000, Strike Off is usually the most cost-effective closure method. When you strike off a company, retained profits of £25,000 or less are taxed as capital, which you’ll pay at the new rate. You cannot claim BADR but you will benefit from the £3,000 Annual Exemption Amount.
If you have retained profits over that amount, regardless of the CGT and BADR changes, a Members’ Voluntary Liquidation is still likely to be the most tax-efficient company closure method.
Find out more about the Members’ Voluntary Liquidation process or contact our team to discuss the best way to close a company in your circumstances. We offer a free phone consultation or you can arrange a meeting at one of our offices throughout the UK.
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We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.
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