Changes to CGT had been widely expected in the lead up to the Budget, with rumours of a significant increase to the top rate of CGT.
The measures that were announced were perhaps not as drastic as they could have been, although they will still result in many taxpayers having a much higher CGT liability following asset sales.
The Chancellor announced that the 10% rate which currently applies to non-residential gains falling into the basic tax band would increase to 18% from 30 October 2024.
The 20% rate which currently applies to gains falling into the higher rate tax band will increase to 24%, again from 30 October 2024. This brings the rate into line with the rate which applies to higher rate residential property gains.
The rate that applies to residential property gains in the basic rate band will remain at 18%.
It was announced that the lifetime limit for Business Asset Disposal Relief (BADR), which applies to gains realised on the disposal of businesses or certain business assets, would remain at £1m.
Gains qualifying for BADR currently attract a 10% CGT rate. This rate will increase to 14% from April 2025, and to 18% from 6 April 2026.
Taxpayers considering making disposals of business or business assets are therefore likely to want to exchange contracts by 5 April 2025 in order to benefit from the current 10% CGT rates afforded by BADR.
Separately, the CGT rate which applies to carried interest (a performance-related reward paid to private equity fund managers) will increase from 28% to 32% from April 2025. There will then be further reform from April 2026, which will result in carried interest being subject to income tax and class 4 National Insurance (i.e. it will be taxed in the same way as trading income).
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