Understanding the 2024 Autumn Budget Capital Gains Tax Reforms

Capital Gains Tax Reforms: What the 2024 Autumn Budget Means for You

The 2024 Autumn Budget introduced several key changes to Capital Gains Tax (CGT), affecting individuals, businesses, and investors across the UK. These reforms aim to increase tax revenue while aligning CGT rates more closely with income tax. Below, we outline the main changes, explain their impact, and provide actionable steps to help you navigate this new landscape.

Key Changes to Capital Gains Tax

1. Increase in Main CGT Rates

From 30 October 2024, the main rates of CGT have increased:

The lower rate for basic-rate taxpayers has risen from 10% to 18%.
The higher rate for higher-rate taxpayers has increased from 20% to 24%.

These changes apply to gains from most assets, including shares, property (excluding primary residences), and other investments.

2. Changes to Business Asset Disposal Relief (BADR) and Investors’ Relief

Business owners and entrepreneurs will see higher rates applied to gains qualifying for BADR and Investors’ Relief:

From April 2025, the rate will increase from 10% to 14%.
From April 2026, it will rise further to 18%.

The lifetime limit for BADR remains unchanged at £1 million. However, these phased rate increases mean higher tax bills for those disposing of qualifying assets after these dates.

3. Carried Interest Tax Rate Adjustment

For private equity and investment fund managers, the CGT rate on carried interest will rise to 32% starting in April 2025. This move aligns the taxation of carried interest more closely with income tax, with plans to fully transition to income tax treatment in the coming years.

Implications for Taxpayers

These changes bring significant financial implications for individuals and businesses:

Higher Tax Bills: Individuals disposing of assets after the effective dates will face increased tax liabilities.
Impact on Entrepreneurs: Those relying on BADR to minimise tax on business sales will need to factor in the higher rates when planning disposals.
Private Equity Professionals: The carried interest adjustment represents a substantial shift in the tax landscape for investment fund managers.

What Can You Do?

With these changes already in effect or on the horizon, now is the time to act. Here are some steps to consider:

1. Review Your Asset Portfolio

If you’re planning to sell assets, consider advancing disposals to take advantage of the current, lower rates before the changes take full effect.

2. Plan Business Sales Strategically

Business owners should consult advisors to explore the most tax-efficient strategies for selling their businesses, taking into account the phased increase in BADR rates.

3. Prepare for Carried Interest Changes

Private equity professionals may need to reassess their financial planning to account for the higher tax on carried interest income.

4. Seek Expert Advice

These changes are complex and require careful planning. A tax advisor at SMH Group can help you navigate the reforms and develop a strategy tailored to your unique circumstances.

Plan Ahead with Confidence

The Capital Gains Tax reforms announced in the 2024 Autumn Budget underline the importance of proactive financial planning. Whether you’re an investor, a business owner, or a private equity professional, understanding these changes is crucial to minimising your tax liabilities and protecting your wealth.