Chancellor John Healey has reportedly drawn up plans for tax changes affecting family businesses ahead of his first Budget. The proposals under consideration would levy income tax when business owners transfer their company to their children, according to a report in the Telegraph.
Under current rules, such transfers can be structured to attract capital gains tax, which is charged at a lower rate. The proposed changes could potentially almost double the tax bill for those handing down their businesses.
Accountants have warned that these plans could negatively impact entrepreneurs preparing for retirement. The Treasury is reportedly seeking to raise hundreds of millions to avoid spending cuts, in addition to the £300m a year expected from previous inheritance tax changes.
Healey is reportedly facing a fiscal challenge for his maiden Budget on 28 October, with economists forecasting a reduction in his fiscal headroom. He is also expected to announce a new tax on gambling machines, anticipated to raise £500m, but has reportedly ruled out aligning capital gains tax with income tax levels.