Retirement Relief
Retirement Relief is a valuable tax relief that can significantly reduce or potentially eliminate Capital Gains Tax (CGT) when you sell or dispose your business or farm assets.
From the 1st of January 2025, upcoming changes which were introduced in the most recent Finance Act, could have an impact on your clients aged 55 or older who are planning to retire or transfer their business. In particular, the changes summarised below could have a significant impact for an individual who is considering passing on their family business to the next generation.
Current Rules (which are changing from 01 January 2025)
At present, where an individual who is aged from 55 to 65 transfers a family business to their children there is no limit to the value of business assets that can be transferred free of tax. From the age of 66 onwards there is a limit of €3 million to the value of any business assets on which can be disposed of tax-free to a child.
In respect to disposals other than to a child, where an individual who is aged from 55 to 65 makes a disposal of business assets the tax-free limit is €750,000. This limit is reduced to €500,000 for disposals made from the age of 66 onwards.
Important Changes Coming (Effective January 1st, 2025)
Transfers to Children:
A new €10 million limit for business assets transferred tax-free to children by owners aged 55-70.
The existing €3 million limit for those aged 66+ now applies from age 70 onwards.
Transfers to Others:
The previous €750,000 limit for ages 55-65 continues to apply, but now up to age 69.
The previous €500,000 limit for ages 66+ continues to apply, but now from age 70 onwards.
What this means for you:
The increase in the starting age for both the €3 million limit on transfers to children and the reduced €500,000 limit on disposals to others offers some flexibility. However, the new €10 million limit on transfers to children could create unforeseen tax liabilities for some transactions after January 1st, 2025.
Considering selling your business or transferring it to your children?
It's crucial to consult with a financial advisor to understand how these changes might impact your specific situation and ensure a smooth transition with minimal tax implications.
If you would like any further information on Retirement Relief or any of the issues discussed above please get in touch.