Key facts
- Tax rate on some family business transfers could rise from 24% to 45%.
- A £1 million business transfer could incur a £450,000 tax bill under the proposed changes.
- The government is seeking to address a potential £35 billion fiscal shortfall.
- HMRC consulted on the proposals over the summer.
UK Chancellor John Healey is reportedly examining a Budget proposal that could significantly increase the tax burden on family businesses seeking to pass ownership to the next generation. The plan, under consideration for the October 28 Budget, would reclassify some business transfers from capital gains to income tax, potentially raising the applicable rate from 24% to 45%. This could mean a tax bill of £450,000 on a £1 million business transfer, compared to the current £240,000. Accountants warn that such measures, following recent inheritance tax changes, could force business owners to sell rather than pass down their companies.