The effect of Capital Gains Tax changes autumn Budget 2024

In the lead up to the 2024 Autumn Budget there was much speculation about the potential Capital Gains Tax increase and changes to Business Asset Disposal Relief.

In the Autumn Budget 2024, The Chancellor announced changes to Capital Gains Tax (CGT), Business Asset Disposal Relief and Investors’ Relief that will affect individuals’ tax liability when they dispose of assets.

In this blog, we take a look at what the new CGT rules are and some areas of focus for business owners, property investors and landlords. But let’s start with the basics.

What is Capital Gains Tax?

Capital Gains Tax is a UK tax that is applied to the profit when you sell or ‘dispose of’ something (i.e. ‘an asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.

You do not pay Capital Gains Tax on all assets; some assets are tax-free. You also do not have to pay Capital Gains Tax if your gains in a year are under your tax-free allowance.

Who is liable to pay Capital Gains Tax?

Every individual can be liable to pay Capital Gains Tax. However, this depends on what you are selling, the amount of gain you make on the sale or disposal of the asset and whether you can use any of the main tax reliefs available.

You will pay Capital Gains Tax when you sell or dispose of the following:

• Personal possessions worth £6,000 or more (apart from your car).
• Property that isn’t your main home.
• Business assets.
• Your main home if you've let it, used it for business or it's very large.
• Shares that are not in an ISA or PEP.

What is exempt from Capital Gains Tax?

Every individual qualifies for a Capital Gains tax-free allowance (called the annual exempt amount). This Capital Gains Annual Allowance is £3,000 for assets and £1,500 for trusts.

Your home (main residence) is exempt from Capital Gains Tax if it has been your only or main home throughout the entire period of ownership.

If you've made gains on investments in an Enterprise Investment Scheme (EIS) will be free from CGT if held for three or more years.

Other assets that you should not pay CGT on are:

• Gifts to UK registered charities.
• Gifts between spouses.
• Stocks and shares held in an ISA.
• Foreign currency for your own use
• Private cars including vintage cars.
• Prizes and gambling winnings.

Capital Gains Tax allowances

You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount).

The Capital Gains tax-free allowance is:

• £3,000
• £1,500 for trusts

Capital Gains Tax reliefs

There are some important tax reliefs to consider when calculating Capital Gains Tax. These reliefs may be available to you and may significantly reduce your CGT liability.

The reliefs available are:

• Business Asset Disposal Relief
• Incorporation Relief
• Private Residence Relief
• Business Asset Rollover Relief
• Gift Hold-Over Relief
• Disincorporation Relief

The qualifying conditions can be complex for these reliefs, so seek advice from specialist Capital Gains Tax advisors such as dns accountants.

The new rules for Capital Gains Tax announced in the Autumn Budget 2024

As part of the Autumn Budget 2024, Chancellor Rachel Reeves and the Labour government announced some significant changes to the rates and rules for Capital Gains Tax. Some of these changes take effect immediately, whilst others are being phased in gradually.

These changes are summarised below:

1. The lower rate of CGT (for basic rate taxpayers) has risen from 10% to 18% and the higher rate of CGT (for higher rate taxpayers) has risen from 20% to 24%. This means anyone who had sold assets with gains on the morning of the Budget (30 October 2024), will fall into the new rates.
2. The CGT rate applicable to trustees and personal representatives will rise from 20% to 24%.
3. The residential property surcharge does not change. This brings tax on assets like shares and managed funds in line with property gains.
4. Capital Gains annual allowances remain at £3,000 per person and £1,500 for trusts.
5. The government announced that it will introduce legislation in the Finance Bill 2024/25 to increase the main rates of Capital Gains Tax (CGT) from 10% and 20% to 18% and 24% respectively. The change took effect for disposals made on or after 30 October 2024.
6. The rate of CGT for Business Asset Disposal Relief and Investors’ Relief will increase 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.
7. The lifetime limit for IR will be reduced to £1 million for all qualifying disposals made on or after 30 October 2024.
8. No changes will be made to residential property gains. These will remain at 18% and 24%.

Anti-forestalling rules

Anti-forestalling rules have also been proposed under the new draft legislation. These are likely to apply to unconditional contracts entered into before 30 October 2024 that were not completed before that date. These contracts will be subject to the new rates of CGT unless:

• Individuals can demonstrate that they did not enter into the contract with the purpose of obtaining a tax advantage by fixing an early disposal date under CGT rules.
• Where the individuals in the contract are connected, they entered into the contract for wholly commercial reasons.

Business Asset Disposal Relief (BADR) and Investors' Relief

From 6 April 2025, the CGT rate that applies to BADR and Investors’ Relief will rise from 10% to 14%.

From 6 April 2026, this rate will further increase to 18%.

CGT rates for carried interest

The Chancellor also announced increases in the CGT rates which apply to carried interest.

From April 2026, all carried interest (which is mainly held by individuals engaged in private equity and hedge fund businesses) will be taxed within the income tax rates framework and subject to class 4 NICs.

A multiplier of 72.5% is expected to be applied to qualifying carried interest that falls within the tax charge.

The current two CGT rates for carried interest will both increase to 32% from 6 April 2025 as an interim step. There will be further consultation on this area in the future.

Business relief (formerly business property relief) and agricultural property relief

The government announced reform of business relief (formerly business property relief) and agricultural property relief. From April 2026, the first £1m of combined business and agricultural assets will continue to be eligible for the existing 100% relief. However, assets over £1 million and shares listed on AIM and similar markets will only be eligible for 50% relief, with an effective rate of inheritance tax at 20%.

Annual Tax on Enveloped Dwellings

Annual tax on enveloped dwellings (ATED) The ATED annual charge will rise by 1.7% from 1 April 2025 in line with CPI. For ATED filing and payment purposes in 2025/26, a property revaluation as at 1 April 2022 is required (or the date of acquisition for a property acquired after that date).

Property value Charge for 2025/26 Charge for 2024/25

More than £500,000 but not over £1 million £4,450 £4,400

More than £1 million but not over £2 million £9,150 £9,000

More than £2 million but not over £5 million £31,050 £30,550

More than £5 million but not over £10 million £72,700 £71,500

More than £10 million but not over £20 million £145,950 £143,550

More than £20 million £292,350 £287,500

Get in touch

With all the changes announced in the 2024 Autumn Budget, now is the time to revisit your tax planning for 2025/26 to ensure you minimise your tax liabilities and maximise your tax savings. Contact our tax team today on 0330 088 6686. or you can also e-mail us at enquiry@dnsaccountants.co.uk.

For more information on other changes in the Autumn Budget 2024 such as Employers National Insurance, Employment allowance, Income tax, Inheritance tax, Pensions, Stamp Duty Land Tax and Non UK domiciled individuals, read our Autumn Budget 2024 blog.

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