What Business Owners Need to Know About the Latest BADR Changes
You might be tired of hearing everyone talk about the latest budget. However, before you tune out, today’s blog is about Business Assets Disposal Relief (BADR), This topic matters more than you think because you could lose thousands of your hard-earned cash.
What Exactly Is BADR?
Let’s break it down. Business Assets Disposal Relief (BADR), formerly called Entrepreneurs’ Relief, is a tax benefit. It’s designed to make selling or passing on your business assets less financially painful.
If you’re considering selling your home care business or retiring, BADR lets you pay a lower capital gains tax rate of 10% instead of the usual higher rates of 33.75%-39.35%. In short, it helps you keep more of the money you’ve worked so hard to earn.
Why This Is Urgent
Until now, BADR has been a helpful tool for business owners. However, the October government budget introduced changes that are just around the corner:
Current rate (up to April 2025): You pay 10% tax on qualifying gains, up to the lifetime limit of £1 million.
Changes after 6th April 2025: The rate rises to 14%, meaning you’ll pay more tax than you do today.
Changes after 6th April 2026: The rate jumps again to 18%, increasing the tax burden even further.
So, why does this matter? Because if you’re thinking about selling your home care business in the near future, acting now could save you thousands of pounds.
What This Means for You
For home care business owners, these changes are significant. Here’s how they could affect your plans:
Higher Tax Rates Are Coming: Starting in April 2025, the 10% tax relief will disappear. You’ll face a 14% rate, and by April 2026, this will rise to 18%. These increases could take a much bigger chunk out of your gains.
Timing Is Critical: If you’re thinking about selling, you might want to consider doing so before April 2025 to take advantage of the current 10% rate.
Why Timing Matters
Picture this: You’re ready to sell your home care business and retire comfortably. However, the difference between a 10% tax rate and a 14%-18% rate could mean losing tens or even hundreds of thousands of pounds. That’s money you could otherwise use to enjoy your retirement or invest in new opportunities.
What Should You Do Now?
This might feel like a lot to process, and that’s completely understandable. To help you get started, here are some actionable steps:
- Talk to Your Accountant: Schedule a meeting with your financial advisor or accountant as soon as possible. They can help you understand how these changes could affect your specific situation.
- Make a Strategic Plan: If you’re considering selling your business in the next few years, these tax changes should factor into your decision-making. Planning now can help you make the most of your hard-earned money.
A Quick But Important Reminder
While this blog provides useful information, Tenera Care Group is not providing financial advice. Always consult a qualified accountant or financial advisor to ensure you’re making the best decision for your unique circumstances.