Restructuring and becoming more efficient in 2025 – January’s View from Alexander & Co
Both business owners and individuals may be wondering what is on the horizon in 2025, following several turbulent years. Understanding your business finances better and considering restructuring may be two of several useful actions to consider in 2025 to help you navigate through the year.
Although 2025 has just begun, a lot has already happened this year. Interest rates look set to reduce slower than previously anticipated (the next announcement from the Bank of England is Thursday 6 February) and over in the US, Donald Trump takes office later today.
The first Labour Budget for 15 years in October last year saw a plethora of tax increases which businesses and individuals will have to navigate this year. These include:
- Increased National Insurance contributions for businesses
- An increase in the National Living Wage
- Reductions in Business Property Relief and Agricultural relief (from 2026, so planning is needed now)
- Business Asset Disposal Relief being reduced (and reduced further in 2026)
- Increased Capital Gains Tax rates for assets (other than residential)
- Stamp Duty Land Tax increases
- Inheritance Tax changes
- HMRC late payment interest rates being increased
- Abolition of the non-dom regime
- Confirmation that tax benefits for furnished holiday lets are being abolished
- VAT on private schools
With this in mind, we have highlighted some areas which business owners and individuals should consider reviewing, to help them move through 2024 more resiliently.
The most important take away from this for business owners is that succession planning and inheritance tax should be reviewed as an urgent priority, even if this has recently been considered.
Getting a better understanding of the financial position of your business
This might sound obvious, but do you truly understand where your business is financially? The starting point for this will be with your accounts, are these up to date and do you understand what they mean? If they are not up to date, consider this a priority and make sure you understand them.
A good accountant and auditor should understand your business and its finances and be able to talk you through what your accounts mean for the business, if not consider your options. Questions to consider include:
- If you carry stock what are your stock levels, do you have too much, if you carry too little, can you keep up with demand?
- How much debt are you carrying, is it beneficial to reduce or increase this?
- How healthy is your cashflow? Can you weather further interest and cost rises?
- Do you know your most profitable business lines, and what are your growth plans?
A proper accounting review with your accountant can achieve this – do you undertake these?
For those companies that are audited annually, the Audit process can sometimes feel invasive, but hopefully your auditors know your business and the industry you work in and you can build a good relationship with a familiar team which audits your business each year. Find out about our audit services here.
Be more tax efficient in 2025 and make sure you understand the key changes affecting you this year
Individuals and business can always benefit from a tax review. Tax is a changing, complex and an often perverse area of the law, so it is beneficial to keep up to date.
Additionally, circumstances change, both from a personal perspective and a business perspective, so with it, tax efficiencies are also likely to change.
In 2025 there are several significant changes that need to be considered, outlined above.
With so many changes, you can quickly see that there is a lot of areas that will impact both individuals and businesses. Even if this was considered a short time ago, a fresh review will benefit.
Business restructuring
Business restructuring can offer many benefits and help to meet the evolving objectives of a firm. In the current economic climate, increased costs and higher interest rates are likely to be affecting the profitability of many companies.
Whilst many firms turn to business restructuring during difficult times, restructuring can also be beneficial for those looking to increase profits and reduce tax liabilities at any time in their life cycle. Restructuring is also often required for specific reasons, such as in preparation for a sale or acquisition, or to safeguard assets. Read more on business restructuring here.
Plan for inheritance tax – with higher taxes it is always important to review and adapt your plans
Inheritance Tax is moving to a residence-based system, which is different to the current system. The full details of this are yet to be disclosed and we will report on this when this is known. This may provide scope for UK domiciles who become non-resident to fall outside the scope of UK Inheritance Tax in certain circumstances.
Inheritance Tax thresholds are being fixed at their current levels until April 2030.
Stating in April 2027, inherited pension pots and death benefits will also be subject to Inheritance Tax.
More significantly, with Business Property Relief and Agricultural Relief being severely reduced (more information below. We urge all business owners to review their Inheritance tax strategies.
With the above in mind, a review of inheritance tax planning can be crucial.
Business Property Relief and Agricultural Property Relief
Commencing April 2026, Business Property Relief alongside Agricultural Property Relief is being significantly restricted. The current rate of relief will continue at 100% for the first £1 million of combined business and agricultural assets on top of the existing nil-rate bands. The rate of relief will reduce to 50% after the first £1 million. AIM shares will be restricted to 50% relief on all their value.
To give an example, if a person passes holding shares in a trading company worth say £10m then currently there would no IHT. There would be £1.8m of IHT when the new rules are applied.
As this is such a significant area which will affect owner manager businesses, we urge businesses to take advice immediately. We can provide advice on mitigation strategies to help combat this increase. Family businesses need to be considering succession planning now. If this applies to your circumstances, please contact us to discuss this with our tax team further.
Business Asset Disposal Relief reductions
The rate of Business Asset Disposal Relief (BADR) is set to be reduced from April 2025. BADR allows a lower rate of Capital Gains Tax on certain disposals. It is currently a valuable relief for business owners selling their businesses.
Currently, where a sale is eligible for BADR, this can reduce capital gains tax to 10%. From April this year, the rate will increase to 14% and from April 2026 to 18%. At 18%, this is the standard rate of CGT which now applies (having increased from 10% in October 2024).
Where this applies, anyone looking to dispose of an interest in a business should take early advice to maximise the higher rates, whilst available.
Are Self Assessment tax returns exhausting you?
Were you one of the 4,400 plus that filed your tax return on Christmas Day or are you yet to submit it?
With increasing tax complexities and people having more financial interests, such as crypto assets or property investments, it is worth considering how you are going to deal with these for the year ahead.
Completing your Self Assessment in advance doesn’t affect when you are required to pay tax to HMRC but gives you peace of mind in understanding your tax liability early. It also allows you to plan your payments and avoiding making last minute mistakes, rushing to complete a return. Further details on Self Assessments this can be found here.
Pre year-end tax planning
Pre end of year tax planning is an important element of both an individual and a business’s tax strategy which helps to ensure that all available tax reliefs and allowances have been utilised in the current tax year. This is also an ideal opportunity to take a wider review of your circumstances and plan for the year ahead.
With the new tax year starting on 6th April, now is the time to take action. This will allow adequate time before the end of the tax year to implement any changes required following a review. More information on end of year tax planning can be found here.
Views from Alexander & Co – restructuring and comprehensive accountancy, tax and business advice
Throughout 2025 we will offer different viewpoints from Alexander & Co, focusing on topical issues affecting businesses and individuals. Below is literally a view from Alexander & Co’s Manchester office. This was taken on a rather cold but sunny early morning on 2 January.
Please contact us if you would like to discuss how we can assist you with any of the above issues. Likewise, if you would like assistance with any other tax or accountancy issue, please get in touch.
You can use the form below, or email info@alexander.co.uk. We will then reach out to discuss how we can assist you.
