A review of capital gains tax could spell bad news for business owners, a Swindon finance firm boss has warned.

Sue Green, a partner at Watersheds, said company owners thinking of selling up should do so quickly or risk a higher tax bill.

“Rishi Sunak has asked the Office of Tax Simplification to consider the overall scope of capital gains tax and the reliefs, exemptions and allowances that apply to it,” she said.

“He has specifically asked the Office to look at how gains are taxed compared to other types of income. At the moment, CGT on the sale of shares is calculated at 10 per cent or 20 per cent depending on whether you qualify for Entrepreneurs’ Relief. This is in stark contrast to the taxation of income at 20, 40 and 45 per cent.

“Put bluntly, if you sell your business for, say, £5m while the current rules apply to CGT, and subject to meeting the Entrepreneurs’ Relief criteria, you will have to pay around £900k in capital gains tax. If the outcome of this review is that personal capital gains are to be taxed at the top slice on an individual’s income at the same rate of income tax, the capital gains tax bill could be up to £2.25m.”

While people might feel now isn’t the right time to sell their company, it was still possible to sell a business for its full value, she said.

Watersheds had supported two company sales during lockdown, including a management buyout.

Ms Green added:“The mood music is clear - I don’t think you have to be a rocket scientist to understand that the Chancellor is going to need to raise some serious money over the coming years and there is going to be a debate about why those selling capital assets should pay less tax than they do on income!

“The tax that business sellers pay is almost certainly going to go up, and has the potential to go up quite substantially.

“So, if you were considering selling your business, but have put plans on hold because you felt the market doesn’t feel promising, it’s worth reconsidering, and swiftly.

“Start the discussion and the process as soon as you can, and you could avoid giving a much larger slice of what you receive to the Treasury.”