Autumn Budget – The highlights series by Sopher + Co (Article 5: Capital Gains Tax)
After months of speculation as to how high Capital Gains Tax (CGT) rates could go, Rachel Reeves finally confirmed the new rates applicable for individuals in the Autumn Budget. Prathab Jagajeevanram, Tax Director, discusses the changes to CGT and shares the following insights:
CGT Rates: The new main rates come into immediate effect from 30 October 2024 but the increased rates for gains qualifying for Business Asset Disposal Relief and Investors’ Relief do not rise until 6 April 2025.
Residential Property: There is no change in the CGT rate applicable on disposals of residential property. It remains as 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. It is worth reiterating that individuals are required to report, and pay any CGT due, on the disposal of UK property within 60 days.
Other Assets: With respect to other assets, the CGT rate for higher and additional rate taxpayers has increased from 20% to 24%, whilst the CGT rate for basic rate taxpayers has risen from 10% to 18%. Given that the annual exempt amount for CGT is now only £3,000 per year, more and more individuals will find themselves realising taxable capital gains in a tax year and triggering tax reporting and payment obligations.
Business Asset Disposal Relief (“BADR”): The 10% CGT rate available on chargeable gains on the disposal of a business or qualifying shares in a trading company will rise to 14% from 6 April 2025 and 18% from 6 April 2026. There is no change to the lifetime cap of £1M of gains for this relief.
Investors’ Relief: The 10% CGT rate for Investors’ Relief will also rise to 14% from 6 April 2025 and 18% from 6 April 2026. The lifetime cap of £10M of qualifying gains has been reduced from £10M to £1M with immediate effect for disposals on or after 30 October 2024.
Carried Interest: For individuals in receipt of carried interest, there will be a flat 32% applied to carried interest receipts chargeable to CGT. HMRC’s current intention is for carried interest be treated as trading income from 6 April 2026 i.e. individuals would be chargeable to Income Tax and National Insurance Contributions at their marginal rate (which could be as high as 45% income tax and an additional 2% of National Insurance Contributions). However, they have announced a ‘call for evidence’ on the treatment of carried interest which will allow them to engage extensively with relevant professionals and stakeholders before making their final decision.
Stockpiled Gains: Individuals in receipt of benefits or capital distributions from offshore trusts are liable to CGT on the benefits/distributions received to the extent that they are matched to stockpiled gains of the trust. The CGT rates applicable are as above, however, a supplemental charge of up to 60% can apply in respect of stockpiled gains (which can increase the CGT rate applicable from 24% up to 38.4%).
Please note, this information is intended as a general overview. It is important that professional advice is sought on specific issues relevant to your circumstances. If you would like to speak with one of our tax advisers, please contact us to find out more.