Prior to the Budget, there was widespread speculation that the Chancellor would make sweeping changes to the Capital Gains Tax ("CGT") regime, either by significantly increasing rates or by radically reducing existing reliefs (or both). However, as it turns out, most will likely view the Budget CGT changes as being relatively modest in comparison with what the government might have introduced. It seems unlikely the measures announced today will cause a substantial change in taxpayer behaviour as, crucially, there still remains a significant delta between the highest rates of income tax (45%) and capital gains tax (24%).
Today the Chancellor announced a package of changes to CGT designed to raise revenue. Certain of these changes take effect immediately, whilst others are being phased in gradually.
Changes to CGT rates effective from Budget Day (30 October 2024)
- The lower rate of CGT (for basic rate taxpayers) will rise from 10% to 18% and the higher rate of CGT (for higher rate taxpayers) will rise from 20% to 24%.
- The CGT rate applicable to trustees and personal representatives will rise from 20% to 24%.
Phased changes to the CGT rates that apply to Business Asset Disposal Relief (BADR) and Investors' Relief
- From 6 April 2025, the CGT rate that applies to BADR and Investors’ Relief will rise from 10% to 14%.
- From 6 April 2026, this rate will further increase to 18%.
As is common on the occasion of rate increases, the legislation contains anti-forestalling provisions designed to render ineffective arrangements taxpayers have entered into with the purpose of accessing the pre-Budget rates. One example of these arrangements is the use of unconditional but uncompleted contracts entered into before 30 October 2024.
The rates of CGT that apply to residential property disposals (18% and 24%) remain unchanged.
The Chancellor also announced increases in the CGT rates which apply to carried interest. To read more about this, click here.
