Introduction

Business asset relief is a tax relief available to individuals and businesses who dispose of certain business assets. In this article, we will explore what business asset relief is and how it can be used to reduce your tax liability.

What is Business Asset Relief?

Business asset relief, also known as entrepreneurs' relief, is a tax relief that allows individuals and businesses to reduce the amount of capital gains tax owed on the disposal of certain business assets. The relief applies to qualifying assets such as shares, business property, and intellectual property.

How Does Business Asset Relief Work?

Business asset relief works by reducing the rate of capital gains tax on qualifying assets from the standard rate of 20% to 10%. This means that if you sell a qualifying asset for a profit of £1 million, you would only pay £100,000 in capital gains tax instead of £200,000.

Qualifying for Business Asset Relief

To qualify for business asset relief, you must meet certain criteria. For example, you must have owned the asset for at least two years before disposing of it, and you must be either a sole trader or partner in a business, or an officer or employee of a company.

Using Business Asset Relief to Reduce Your Tax Liability

Selling Shares

If you are selling shares in a company, you may be able to use business asset relief to reduce your tax liability. However, there are certain conditions that need to be met, such as owning at least 5% of the shares and being an officer or employee of the company for at least two years before the sale.

Selling Business Property

If you are selling a business property, such as a commercial building, you may be able to use business asset relief to reduce your tax liability. However, the property must have been used for business purposes for at least two years before the sale.

Selling Intellectual Property

If you are selling intellectual property, such as a patent or trademark, you may also be able to use business asset relief to reduce your tax liability. However, the intellectual property must have been used for the purposes of your business for at least two years before the sale.

Conclusion

Business asset relief is a valuable tax relief that can help to reduce your tax liability when disposing of certain business assets. By understanding the criteria for qualifying for the relief and the types of assets that can be included, you can make the most of this tax relief and minimize your tax liability. If you are unsure whether you qualify for business asset relief, it is important to seek professional advice from a tax specialist.