Implications of Potential Tax Changes for Family Business Owners

As the UK general election approaches, the topic of taxation is at the forefront of political discussions. With a potential Labour government on the horizon, questions arise about how taxes may be affected, particularly for family business owners.

Labour has stated that they will not raise taxes for working people, but they have been relatively silent on inheritance and Capital Gains Tax (CGT). The party’s proposed spending may create a shortfall that could be addressed with an early Budget after the election, potentially leading to increases in CGT and inheritance tax.

CGT is a levy on profits made from selling assets, such as company shares or property, and can impact family business owners, even if they gift assets without receiving money. The Conservative party previously reduced CGT rates, but the tax-free threshold is set to decrease significantly by 2024, potentially leading to higher base rates.

Inheritance tax, charged at a rate of 40%, is another concern for family business owners. With only a small percentage of UK estates currently subject to this tax, there may be pressure to review rates and exemptions to generate more tax revenue.

Effective tax planning, such as investing in assets that qualify for relief or utilizing pension policies, can help mitigate inheritance tax liabilities for individuals. As the new government’s taxation plans unfold, family business owners are urged to start succession planning early to safeguard their hard-earned assets.

The implications of potential tax changes on family businesses are significant, and it is essential for owners to stay informed and proactive in protecting their wealth.