[ad_1]
Young entrepreneurs* accounted for just 2% of the profits made by all businesses sold in the UK last year**, says Boodle Hatfield, a leading private wealth law firm.
These entrepreneurs made just £556 million in profits out of the £28.9 billion made in total by individuals selling their businesses. Entrepreneurs aged 55-64 benefited the most of any age group when selling their businesses with profits of £10.2bn, followed by those aged 45-54 who made £8.4bn.
Hayden Bailey, partner at Boodle Hatfield, says the figures show most businesses are sold later in life. If the UK is to be seen as a thriving base for young entrepreneurs, more needs to be done to provide tax breaks for business owners rather than business investors. This could include a more generous tax break on the profits entrepreneurs make from selling their business.
In March 2020, Entrepreneurs’ Relief was discontinued and replaced by a less generous Business Asset Sale Relief (BADR). Under entrepreneur relief, people selling their business could pay capital gains tax on the sale of their business at a reduced rate of 10% (as opposed to 20%). This applies to lifetime earnings of up to £10,000,000. Under the new regime, the relief that can be claimed has been reduced by 90% to a lifetime maximum of £1,000,000.
Hayden Bailey says: “There is a perception that the UK is an unbeatable hive for start-ups. The UK is getting there but not quite there yet in terms of stimulating young entrepreneurs.”
“More needs to be done to help young entrepreneurs start and grow businesses. This will include tax rules that encourage owners as well as investors, and rules that encourage entrepreneurs to keep and grow their businesses in the UK rather than preparing for a sale. The UK needs to be globally competitive in this regard.
“Young entrepreneurs should be better supported. Many of them are creating exciting, innovative start-ups in the UK, particularly in technology and fintech. These businesses will play an important role in the growth of the economy.”
Boodle Hatfield says that as the UK faces the prospect of a recession, owner-managed businesses will need support amid rising inflation and rising interest rates.
Hayden Bailey says: “Studies show that startup activity is a powerful accelerator for the economy. The UK faces many challenges in the coming months and it is clear that more help is needed to encourage long-term investment in business growth.’
“Part of the next government’s vision for the future is likely to be an economy built on a culture of entrepreneurship. Providing sustainable and responsible incentives in the form of tax breaks will encourage longer-term thinking among entrepreneurs, which in turn will stimulate economic growth.”
Age breakdown of entrepreneurs’ relief claimed in tax year 2019-20
*Under the age of 35
**31 March 2020, the last tax year before entrepreneurs’ relief is reduced by 90%
This article was first published in City AM and Business Money.
[ad_2]
Source link