- Aged 85 and above make £1.1billion
- Calls for Government to do more to encourage entrepreneurialism following cuts to business reliefs
Young entrepreneurs* accounted for only 2% of the gains made from all UK businesses sold in the past year**, says Boodle Hatfield, a leading private wealth law firm.
These entrepreneurs made just £556m in profits out of £28.9bn made in total by individuals selling their businesses. Entrepreneurs aged 55-64 made the most out of any age group when selling their business, with profits of £10.2bn, followed by those aged 45-54, who made £8.4bn.
Hayden Bailey, Partner of Boodle Hatfield says the figures demonstrate that most businesses are sold later in life. If the UK wants to be seen as a thriving base for young entrepreneurs, more needs to be done to provide tax reliefs for owners of businesses rather than investors in business. This could include a more generous tax relief on the gains that entrepreneurs make from selling their business.
In March 2020 Entrepreneurs Relief was ended and replaced by a less generous Business Asset Disposal Relief (BADR). Under Entrepreneurs Relief, people selling their business were able to pay capital gains tax from the sale of their business at a reduced rate of 10% (as opposed to 20%). This applied to lifetime gains of up to £10,000,000. Under the new regime, claimable relief was cut by 90% to a maximum of £1,000,000 over a lifetime.
Hayden Bailey, says: “There is a perception that the UK is an unbeatable hive for start-ups. The UK is getting there but it’s not quite there yet in terms of incentivising young entrepreneurs.”
“More needs to be done to help young entrepreneurs start up and grow a business. That would include tax rules that encourage owners as well as investors, and rules that encourage entrepreneurs to retain and grow their business in the UK, rather than prepare for a sale. The UK needs to be competitive globally in this respect.”
“Young entrepreneurs need to be better supported. Many are creating exciting, innovative start-ups in the UK, particularly within tech and fintech. These businesses will play an important role in growing the economy.”
Boodle Hatfield says that as the UK faces the prospect of a recession, owner-managed businesses will need support amid soaring inflation and rising interest rates.
Hayden Bailey says: “Studies have shown that start-up activity is a strong accelerant for the economy. The UK faces many challenges in the months ahead and it’s clear that greater help is needed to encourage longer-term investment in growing a business.”
“Part of the next Government’s vision for a future is likely to be economy built upon a culture of enterprise. Delivering sustainable and responsible incentives in the form of tax reliefs will encourage longer-term thinking among entrepreneurs, in turn boosting economic growth.”
Age breakdown of Entrepreneurs Relief claimed in 2019-20 tax year
*Aged below 35
**March 31 2020, last tax year before Entrepreneurs Relief was cut by 90%