Capital Gains Tax
Rates and annual exempt amount
Labour made no manifesto commitments on CGT and it was widely anticipated that there would be significant rises in rates, perhaps even bringing them up to income tax levels. In the event, a number of changes were announced, but they did not go that far. From 30 October 2024, the main CGT rate for all assets is now 24% (other than receipts of carried interest, which remains at 28%). This 24% rate previously only applied to residential property that was not exempted under principal private residence (PPR) relief. Where the gain can be matched against the taxpayer’s basic rate band, the rate is now 18% for all assets. Previously it was 10%, except for residential property and receipts of carried interest.
From the same date, the CGT rate payable by trustees and personal representatives increases from 20% to 24% (other than receipts of carried interest, where it remains 28%).
From 2025/26, the rate of CGT on carried interest will increase to a flat rate of 32% for individuals, estates and trusts. From 2026/27, carried interest will be brought within income tax, subject to a multiplier of 72.5% in some cases.
The CGT annual exempt amount remains £3,000 for individuals and estates and £1,500 for most trusts.
Business Asset Disposal Relief (BADR)
The lifetime limit for qualifying gains, which attract a 10% tax rate, remains £1 million. However, for 2025/26, the BADR rate will rise to 14% and, in 2026/27, it will become 18%.
Another relief, Investors’ Relief, can also give a 10% tax rate to qualifying investors in qualifying companies for which they do not work. The lifetime limit is cut from £10 million to £1 million from 30 October 2024 and the rate of tax will rise in line with BADR.
There are anti-forestalling rules that may prevent taxpayers benefitting from the previous lower rates, where contracts are entered before the dates of change and do not complete until afterwards.