Capital Gains Tax (CGT) Changes in the Autumn Budget 2024
The Autumn Budget 2024 introduced notable adjustments to Capital Gains Tax (CGT) rates and reliefs, affecting individuals, trusts, and estates. While anticipated increases did not reach income tax levels, the updates bring higher rates. Furthermore, adjustments to relief limits will impact tax planning for assets, property, and carried interest. Here’s what you need to know.
New CGT Rates and Exemptions
From October 30, 2024, the primary CGT rate for all assets is now set at 24%. Previously, this rate applied only to gains on residential property not covered by Principal Private Residence (PPR) relief. While gains on other assets fell under different rate structures.
Updated Rate Structure:
- Basic Rate Band: Gains within the basic rate band are now taxed at 18% across all assets, up from 10% for most asset classes. Although residential property was already taxed higher.
- Trustees and Estates: For trustees and personal representatives, the CGT rate increases from 20% to 24%.
- Carried Interest: Currently taxed at 28%, the rate for carried interest rises to a flat 32% in 2025/26, and from 2026/27, it will be subject to income tax with a multiplier of 72.5% applied in some scenarios.
CGT Annual Exemption: The annual exempt amount remains unchanged at £3,000 for individuals and estates and £1,500 for most trusts.
Business Asset Disposal Relief (BADR) and Investors’ Relief Adjustments
Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief, maintains its lifetime limit of £1 million in qualifying gains. However, it brings in rising tax rates in future years:
- 10% Rate Maintained for 2024/25: The current rate remains 10%.
- 14% Rate from 2025/26: For gains from 2025/26, the rate will increase to 14%.
- 18% Rate from 2026/27: Starting in 2026/27, qualifying gains will be taxed at 18%.
Investors’ Relief: Investors’ Relief, which also offers a 10% tax rate for qualifying investors who don’t work for the qualifying company, will see its lifetime limit reduced dramatically from £10 million to £1 million from October 30, 2024, with rates set to rise alongside BADR.
Anti-Forestalling Rules: Taxpayers should be aware that anti-forestalling measures are in place. These measures prevent pre-emptive planning using contracts completed after the rate changes. As a result, taxpayers cannot benefit from the previous lower rates.
Key Implications and Tax Planning Considerations
These changes in CGT rates and exemptions are significant for investors, business owners, and individuals with large capital gains. With higher rates across the board, tax planning will be crucial to managing liabilities.
- Consider the Timing of Asset Sales: Given the rate increases, strategic timing of asset disposals before or after rate adjustments can optimize tax efficiency.
- Reevaluate BADR and Investors’ Relief Usage: For those close to the lifetime limit or planning to use BADR or Investors’ Relief, these changes may prompt a reassessment of strategies to maximize relief.
- Explore Tax-Sheltered Investments: As CGT rates rise, investments in ISAs and pension funds. Which shelter gains from CGT, become increasingly attractive options.
Planning Ahead with Merranti Accounting
Navigating the new CGT rules will require informed decisions and expert guidance. At Merranti Accounting, we can help you assess the impact of these CGT changes on your financial plans, from investment portfolios to business asset sales.
Contact us today to discuss strategies to minimize your CGT liability. Make the most of reliefs, and ensure tax efficiency under the updated CGT framework.
Merranti Accounting – Helping You Stay Ahead in Tax Planning.
