Closing a solvent trading company? Consider doing so before 6 April 2025
12 March 2025
If you (or your clients) are looking to wind down a solvent trading company due to retirement or other reasons, it’s important to plan now to obtain reduced tax rates.
In certain circumstances, shareholders of such businesses may qualify for Business Asset Disposal Relief (BADR), a tax relief which offers a reduced rate of Capital Gains Tax (CGT) payable on the profit you make (up to £1 million of gains), when selling or disposing of business assets.
From 6 April 2025, BADR CGT rates will increase from 10% to 14%. This rate is expected to increase again to 18% on 6 April 2026.
By exiting your business via a solvent liquidation and distributing those assets before 6 April 2025, a qualifying company with net assets of £2 million to be distributed to its 2 shareholders could provide a combined tax saving to those shareholders of £80,000*.
*£2 million x (14%-10%) = £80,000. The actual tax position will vary depending on your circumstances. This illustrative figure ignores the CGT annual exemption, assumes that the distribution to the shareholders qualifies for BADR in full, that the shareholders have not previously claimed any BADR or Entrepreneurs Relief, and that the shareholders have no tax base cost or capital subscribed in their shares. This illustration also assumes that the Targeted Anti-Avoidance Rules do not apply to distributions made in the course of the liquidation.
Get in touch
Our solvent liquidation team get the best outcomes for you (or your clients) by working with our specialist tax team and our financial planning team to ensure your lifelong investment in your business continues to work hard for you even after you cease to trade.
Key contacts
Melissa Reardon Associate Director - Restructuring Services - Birmingham
Laura Salter Director - Financial Planning - Birmingham
Richard Tidball Director - Tax - Birmingham
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Our restructuring specialists work with a breadth of companies to review the solvent solutions open to them. We review company structures, manage complex corporate simplification projects and advise on a variety of solvent exit strategies, where shareholders are seeking to receive assets and profits in a tax efficient manner.
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