Budget 2024: Preston experts explain the impact on individuals, businesses and farmers

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With £40bn of tax rises having been announced in this week’s budget and much of the focus being on the biggest - the increase in employer national insurance contributions - the Post asked some of the experts at Preston-based law firm Napthens for their assessment of what some of the other government revenue-raisers mean for both businesses and individuals. Here’s what they had to say.

With £40bn of tax rises having been announced in this week’s budget and much of the focus being on the biggest - the increase in employer national insurance contributions - the Post asked some of the experts at Preston-based law firm Napthens for their assessment of what some of the other government revenue-raisers mean for both businesses and individuals.

Here’s what they had to say.

Capital gains tax

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What does the budget mean to you?What does the budget mean to you?
What does the budget mean to you?

Capital gains tax (CGT) is levied on profits made from the sale of assets. If you want to avoid paying the tax, you simply avoid selling your asset (if you can), or, as we have seen, you accelerate the sale and sell whilst you know what the rate is and before any increase in the budget.

Most CGT comes from the small number of taxpayers who make the largest gains; in the 2022 to 2023 tax year, the total CGT liability was £14.4 billion for 369,000 taxpayers, realised on £80.6 billion of gains. In the same tax year, 41 per cent of the CGT yield came from those who made gains of £5 million or more.

This group represents less than per cent of CGT taxpayers each year. The CGT yield will inevitably be higher for this year due to the increased activity of everyone selling what they can before the budget.

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Increase in CGT rates from 10-18% (for basic rate tax payers) and 20-24% (for higher rate tax payers)

What is the likely effect on an increase in the current rates?

Keith Melling, partner and head of corporate at Napthens, said: “People change their behaviour and plan for the inevitable change. People who do not have to or cannot sell in the next four years, will not sell (hang on and wait for rates to reduce) . Those who wish to sell will try to do so before April 2025 when the first rate increase comes into play.

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“The media has reported the number of voluntary liquidations of businesses rising above 1600 in October, according to the London Gazette. This is more than double the number recorded over the same period last year and may continue in advance of April 2025.

“People are more mobile than in 1980 (and with the development of technology can stay connected more easily) and move abroad to a lower taxing jurisdiction and sell their assets (provided not UK property) then.”

“This CGT rate increase could mean fewer sales and so less CGT for the exchequer (as warned by the Treasury themselves) and to the extent that any reliefs remain from CGT, these will become more valuable and heavily scrutinised. Sales to employee-owned trusts which currently receive full relief from CGT have not been changed.”

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Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief (BADR) was claimed by 44,000 taxpayers on £12.5 billion of gains in the 2022 to 2023 tax year, resulting in CGT liabilities of £1.2 billion; eight per cent of the CGT yield.

BADR continues at 10 per cent until April 2025 when it increases to 14 per cent and then to 18 per cent from April 2026 on the first £1m of lifetime gains. Had BADR been abolished, its effect would be disproportionately felt by small owners of business and those who own a smaller amount of shares through (say) employee share schemes. For this reason, we are pleased that this relief remains to encourage growth at the grass roots level.

Agricultural Property Relief

Andrew Holden, partner and head of rural business with north west law firm Napthens, said: “I’m in shock at the update on Agricultural Property Relief (APR) and Business Property Relief (BPR) for farmers. I think we knew there would be a change to APR as this was a relief used by some to avoid tax by simply investing in farmland to utilise APR.

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“Working farmers did not necessarily need to rely on APR as they had BPR to fall back on . They were trading farming businesses and had protection from Inheritance Tax (IHT) on the basis of the 100 per cent BPR relief. This is now gone also over the £1m threshold.

“BPR used to be utilised for the livestock, plant machinery and growing crops – it seems that the combined £1m cap on APR and BPR will mean that most of this is used in the land and buildings on farms meaning there is no relief left for the livestock and deadstock and potentially 20 per cent tax on this all.

“What the government does not seem to have taken into account is that smaller farms have not been viable for some time due to the economies of scale. Naturally, smaller farms have been sold and incorporated into larger farms and farmers have borrowed and re-invested in growing the farm to secure the future for their families. The future of farms is now under risk and so is our food security as no farmers means no food!

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“The impact is not just on the IHT changes either, the capital gains tax (CGT) changes will impact any sales by farmers too. There is no mention of a change of CGT reliefs, so we are hoping this is still available to allow reinvestment.

“The problem is that farmers reinvest all their profits into the farm. It is not just a business it is their home and a lifestyle. They are cash poor but asset rich so if there is a tax bill they will struggle to fund the same without the sale of assets. They face the real risk of having to sell large chunks of land to pay of IHT making the farms less viable and productive.”

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