Relief for owners of small firms scaled back
The Chancellor left capital gains tax (CGT) broadly unchanged in the 2018 Budget but tweaked rules on tax relief for entrepreneurs by extending the qualifying period for the tax break from 12 months to two years.
There had been calls to scrap the relief, but Philip Hammond defended its role in supporting a dynamic economy. Entrepreneurs pay a lower 10pc rate of CGT, compared with the standard rate of 20pc, when they sell all or part of their business if the capital gain is more than the annual exempt amount of £11,700.
From April 6 2019, to qualify you must be a sole trader or business partner and have owned all or part of a business for at least 24 months before you sell.
The relief is claimed by about 50,000 individuals each year and average claimants typically save about £8,000 in tax.
Sam Birchall, 26, from Leighton Buzzard, Bedfordshire, runs his own business selling home-made fudge. He
said: “Any policy that helps encourage entrepreneurs is a good thing. It’s very daunting setting up your own business: you put in your own capital and hope that you’ll make enough to break even. But the benefit of doing something you love is worth it.”
Other changes aim to tackle some who were abusing the relief by restricting the tax break to people who have at least a 5pc stake in the company’s profits and assets.
Neil Lancaster of accountants Blick Rothenberg said: “Previously some people with less than a 5pc interest in a company would arrange to increase their holding to 5pc of the share capital and voting rights, but not 5pc of the equity or economic rights in the company.”
This meant that they could take advantage of the tax break without genuinely committing capital to the growth of the company.
Sam Birchall runs his own business selling home-made fudge. He called it ‘daunting’