In the Budget it was announced that the rates of Capital Gains Tax (CGT) are to be increased with immediate effect. The main rates of CGT that apply to assets other than residential property and carried interest will increase from 10% to 18% (for Income Tax basic rate payers) and from 20% to 24% (for Income Tax higher rate payers). The changes are applicable for disposals made on or after 30 October 2024.
The rate of CGT that applies to trustees and personal representatives also increases from 20% to 24% for disposals made on or after 30 October 2024. The rates of CGT that apply to residential property disposals (18% and 24%) remain unchanged. The new rates will now mirror these rates as had historically been the case.
The rate of CGT that applies to Business Asset Disposal Relief and Investors’ Relief will increase from 10% to 14% for disposals made on or after 6 April 2025. There will then be a further increase, from 14% to 18% for disposals made on or after 6 April 2026. There were no changes announced to the lifetime limit for Business Asset Disposal Relief, which remains at a £1 million lifetime limit. However, the lifetime limit for Investors’ Relief has been reduced from £10 million to £1 million for IR qualifying disposals made on or after 30 October 2024.
There are special provisions for contracts entered into before 30 October 2024 but completed after that date for the main rate changes, and for contracts entered into on or after 30 October 2024 for the phased rate change that applies to Business Asset Disposal Relief and Investors’ Relief. There are also special provisions for share reorganisations and exchanges where an election is made.
It was further announced that the normal and higher rates of CGT on carried interest (currently 18% and 28% respectively) will increase to a single unified rate of 32% from 6 April 2025. From April 2026, carried interest will be subject to a wider package of policy changes that will be announced at a later date.