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The Chancellor Rachel Reeves delivered her first Budget on 30 October 2024, providing some much-needed clarity on the new Government’s tax policies following months of speculation. In this briefing note, we provide a summary of the main announcements relating to Capital Gains Tax (CGT).
There seemed little doubt that rates of CGT would be increased at the Budget, with some predicting that they would be aligned with Income Tax rates. This was not the case.
As from 30 October 2024, the lower main rate of CGT will be increased from 10% to 18% and the higher main rate from 20% to 24%. The new rates match the residential property rates, which remain unchanged.
Anti-forestalling rules have also been proposed under new draft legislation. These are expected to apply to unconditional contracts entered into before 30 October 2024 which were not completed before then. These contracts will be subject to the new higher rates of CGT unless:
- The parties can demonstrate that they did not enter into the contract with a purpose of obtaining a tax advantage by fixing an early disposal date under CGT rules.
- Where the parties to the contract are connected, they entered into the contract for wholly commercial reasons.
Business Asset Disposal Relief (BADR) and Investors’ Relief
Changes were also announced to BADR and Investors’ Relief.
BADR (formerly known as ‘Entrepreneurs’ Relief’) reduces the CGT rate on qualifying gains made on disposals of businesses or certain shares or securities of a trading company, subject to satisfying various conditions.
Investors’ Relief similarly reduces the CGT rate on a disposal of shares in an unlisted trading company, but where the investor is unconnected with the business.
The CGT rate for both reliefs will increase from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.
Anti-forestalling rules (as part of the new draft legislation noted above) will also be introduced and will broadly apply for BADR and Investors’ Relief where a contract is made from 30 October 2024 to 5 April 2026 and completed from 6 April 2025.
The lifetime limit for Investors’ Relief has been reduced (to match BADR), from £10 million to £1 million of qualifying gains for an individual, for disposals made on or after 30 October 2024.
Carried Interest
The rate of CGT applying to carried interest will increase to 32% from 6 April 2025. This will be a temporary measure for the 2025/26 tax year whilst the government carries out a consultation on reforms to the tax treatment of carried interest.
From 6 April 2026, carried interest will be subject to a revised regime within the Income Tax framework.
There is still plenty to digest as we work through all the changes and technical points. We will continue to provide updates on specific taxes and planning opportunities over the course of the month. Please contact a member of the Tax, Trusts & Succession team for more information and formal advice.
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