Capital Gains Tax Changes

It has been clear for some time that Capital Gains tax (CGT) was going to be targeted by Chancellor Rachel Reeves at the Budget. But it is of some comfort that the rates of CGT the Chancellor announced did not increase to much higher levels. Partner Kenny Adamson provides the details.

The eventual outcome will be a simpler regime, with just two rates and no distinction between different types of assets, but the changes will be phased in between now and 6 April 2026. The new rates are as follows:

• The main rates (i.e. the rates applicable to assets other than carried interest and residential properties) are rising from 10% to 18% at the basic rate and from 20% to 24% at the higher and additional rates. The new rates will apply to disposals made on or after Budget Day.
• The rates applicable to carried interest are rising from 18% (basic rate) and 28% (higher/additional rate) to a unified rate of 32% with effect from 6 April 2025. This is an interim measure which will apply only to the tax year 6 April 2025 to 5 April 2026, after which carried interest gains will be within income tax (albeit at 72.5% of usual rates, giving an effective rate of 32.625% for additional rate taxpayers).
• The rates applicable to residential real estate properties are being left unchanged at 18% (basic rate) and 24% (higher/additional rate).
• The main rate payable by trustees and personal representatives will rise from 20% to 24% with effect from Budget Day.

Some of the main reliefs from CGT remain unchanged, such as rollover and holdover relief, but Business Asset Disposal Relief will rise in rate from the current 10% of gains over £1m to 14% from 6 April 2025 and 18% from 6 April 2026. Therefore, if you are considering exiting your business, now would be the time to take advice and start planning.

Do contact us at JRW Hogg & Thorburn for further help and advice about these CGT changes and how it may impact you.