Budget provides entrepreneurs with £80k giveaway

Thursday, March 25, 2010 | Posted by: Fiona Cullinan
Categories: Economy, Tax | Tags: business, tax, entrepreneurs, entrepreneur, capital gains tax, CGT, budget, Alistair Darling, relief, budget2010

‘Entrepreneurs’ may not have made the top 100 keywords used in Alistair Darling’s budget speech (see our Wordle below), but Budget 2010 held some good news for entrepreneurs looking to sell their business, as the Chancellor raised the level of entrepreneur’s relief and froze Capital Gains Tax (CGT).

“Rather than raising Capital Gains Tax rates as expected by many, the Chancellor announced an increase in Entrepreneurs’ Relief from £1 million to £2 million,” said Paul Cooper, Tax Partner at Grant Thornton UK LLP.

“This means that entrepreneurs selling their businesses and qualifying for the relief should only pay 10% CGT on their first £2 million of gains, saving them up to £160,000 of tax as compared to £80,000 previously.”

Chancellor Darling said in his speech:

“No country has more talent… We have worked hard to create the environment where this ingenuity and entrepreneurial flair can thrive.

I am also going to make it more attractive for wealth-creators and innovators to set-up their own businesses. To do this, I am doubling entrepreneurs’ relief for Capital Gains Tax. At the moment, the first million pounds of lifetime gains are taxed at a lower rate of 10 per cent, rather than the main rate of 18 per cent. This threshold will now increase to £2m, enabling entrepreneurs to benefit more from their effort and investment. And I can also confirm today that I am not increasing the main rate of Capital Gains Tax.”

However, Paul Cooper, Tax Partner at Grant Thornton UK LLP, added: “There is a catch for entrepreneurs who have already claimed for relief on gains of over £1 million in the current tax year. Under the proposed change they can not claim additional relief to the new £2 million limit in this current tax year, but need to wait until they realise other gains in the future.”

Image: © http://www.wordle.net showing

For more reports and reaction to the Budget, visit our dedicated Budget 2010 site.