Last updated: 13 Jan 2025 12:00 Posted in: AIA
Big changes are coming to the tax benefits associated with Business Asset Disposal Relief (BADR) - and they’re coming fast. From April 2025, tax rates on gains eligible for BADR will rise, cutting into the financial benefits of winding up a company using an MVL.
If you're advising clients on closing their solvent company—whether they’re retiring, moving on to a new venture or simply wrapping up a completed project—acting quickly is essential to secure current tax benefits.
How the shake up will impact MVL
MVL (Members Voluntary Liquidation) is a formal process for closing a solvent company, allowing directors to distribute remaining assets as capital rather than income. This capital distribution often qualifies for Capital Gains Tax (CGT) treatment, offering significant savings compared to income tax rates.
And for many directors, BADR reduces CGT to just 10%—a major incentive for using an MVL.
However, that advantage is about to change.
From April 2025, the CGT rate under BADR will increase to 14%, followed by another hike to 18% in April 2026.
The current 10% BADR rate is the most tax-efficient way to close a solvent company. Delaying could mean a substantial tax increase on distributed assets.
For example:
That’s an extra £20,000 in tax liability—a significant cost for waiting too long.
Is an MVL right for your clients?
MVLs are most suitable for solvent companies with retained profits exceeding £25,000. To qualify:
Don’t wait—time is running out
The April 2025 tax changes are looming. If you have a client considering closing their business, the time to act is now. Speak to one of our licensed insolvency practitioners today and ensure your client doesn’t miss out on the current tax advantages.
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