Further tax changes could be on the horizon as Keir Starmer, Rachel Reeves and Angela Rayner refuse to guarantee there will be no more. Initially, Rachel Reeves, Chancellor of the Exchequer reassured business leaders at the Confederation of British Industry conference that there would be no further raises after the £40 billion tax hike announced in the Autumn 2024 Budget. However, Reeves has refused to repeat this pledge since stating only that the government will ‘never have to repeat a Budget like that’. Moreover, Starmer has said he can’t rule out further tax rises before the next election.
The Autumn Budget made major changes that affect IFAs who are considering acquisition. Under the changes, Business Asset Disposal Relief remains but vendors will pay 80% more on the current rate of relief for the first £1m from April 2026. Further impacts include changes to Business Property Relief, Pensions Tax, Employers National Insurance/Wage increases, and Inheritance Tax.
Angela Rayner has also failed to reassure the public against further inheritance tax raids despite substantial protests at Westminster opposing the increases. Current BPR and APR provides unlimited 100% relief from Inheritance Tax. But under the changes implemented by the Autumn Budget, there will be a combined limit of £1m and qualifying assets over that limit will only attract 50% relief from April 2026. New rules also mean unused pension funds and death benefits will be brought into a person’s estate for IHT purposes from April 2027. Further changes could worsen this already substantial burden for business owners, particularly for family run businesses which pass down generations.
So, what could prompt further tax changes? With the next major fiscal statement expected in the spring, Labour could run into concerns regarding the delivery of their promises that requires them to resort to another tax raid.
What has happened since the Autumn 2024 Budget?
The Autumn Budget introduced a lot of uncertainty into the market with employers expressing concerns over national insurance hikes and increased business costs due to introduced tax changes. The Bank of England has echoed this sentiment with their decision to maintain the current 4.75% interest rate. They cited the ongoing high rates of inflation as the influence for this decision with inflation increasing in November 2024 to 2.6%, up from 1.7% in September. Some better news released mid-January with a surprise fall in UK inflation to 2.5% in December and UK economy grows by 0.1% in November which has given hope of an interest rate cut by the Bank of England on 6th Feb more likely.
Although Labour continues to reaffirm their pledge to grow the economy, inflation above target of 2% and the Bank’s decision to maintain the high interest rate could weigh heavily. Slow economic growth and rising borrowing costs may undermine Labour’s financing and mean they are unable to deliver on their promises without further funding via further tax rises.
What does this mean for Financial Advisors selling their business?
Under the changes introduced by the Autumn Budget, IFAs will already be paying more tax than before. Further tax changes could worsen this burden, increasing the amount you pay when selling your business!
Why pay more when timing a sale could prevent it?
With such daunting possibilities on the horizon, IFAs would be wise to consider their options now! Despite concerns, the market for acquisitions remains positive for the time being with Acquirers still eager to buy quality IFA firms. Competitive multiples also remain rife. However, as the economic landscape changes we may see buyers begin to offer less for IFA businesses. Even if the current changes sit well with you, that may not be the case if Labour announces further raises. Don’t let time take your opportunity to maximise your capital event!
Conclusion
With Labour firmly maintaining the possibility for further raises, a heavy tax burden could be on the horizon for any IFA selling their firm. Economic uncertainty continues to grow but for now, the acquisition market remains positive. We recommend considering your options and contacting your Broker before there are further changes.
Don’t lose out reaping the rewards of your years of dedication and hard work! Our highly knowledgeable and experienced team of industry professionals are on hand to support you. If you need advice or are seeking clarity on selling your firm, contact us for a free, no-obligation consultation.
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