Rates of Capital Gains Tax
The Chancellor announced an increase in Capital Gains Tax (CGT) for gains on sales and disposals made after 30 October 2024. The modest CGT annual exemption of £3,000 remains frozen.
The lower rate of CGT for gains within the basic rate band increases from 10% to 18% with the higher rate of CGT, which applies to gains above the basic rate threshold, will increase from 20% to 24%.
Private residence relief
Private Residence Relief (PRR) remains available for the main home, but CGT on residential properties not covered by the relief, including buy-to-let and second homes, will align with the new rates.
Business Asset Disposal Relief
The lifetime limit for investors selling assets qualifying for Business Asset Disposal Relief (BADR), formally known as Entrepreneurs relief, will be frozen at £1million meaning individuals selling or disposing of qualifying business assets can still benefit from lower rates of tax.
However, the rate in which tax will be payable on assets qualifying for BADR will increase from 10% to 14% for disposals made after 6 April 2025 with a further increase to 18% from 6 April 2026.
Investors Relief
The lifetime limit will be reduced from £10 million to £1 million for all qualifying disposals made on or after 30 October 2024. This reduces the amount investors can receive in tax relief.
The rate of tax payable on qualifying assets will increase in line with the above BADR rules:
- From 10% to 14% for sales in 2025/26; and
- 18% from 2026/27.
Carried Interest
The treatment of carried interest received by fund management executives has been subject to scrutiny for many years. Providing certain conditions are met, these returns have typically been taxed at lower CGT rates rather than being subject to income tax and NIC.
The Chancellor announced a number of reforms, with the first step increasing the CGT rate on carried interest from 28% to 32%.
From April 2026, carried interest will be taxed in line with ordinary income to provide a fairer outcome “with bespoke rules to reflect its unique characteristics” – essentially a discount on the amount taxable.