Capital Gains Tax – What the New Higher Rates Mean for You

If you’re planning to sell investments, business assets, or property, recent changes to Capital Gains Tax (CGT) rates could significantly impact how much tax you owe.

With increases to the main CGT rates, as well as Business Asset Disposal Relief (BADR) and Investors’ Relief, understanding these changes is crucial to ensure you minimise tax liabilities and plan ahead effectively.

What’s changed

New CGT rates apply from 30 October 2024 for most disposals, with further changes from April 2025 and April 2026.

Increases from 30 October 2024:

• Main CGT rates (for assets other than residential property and carried interest) increase from 10 per cent to 18 per cent (basic rate taxpayers) and from 20 per cent to 24 per cent (higher and additional rate taxpayers).
• The CGT rate for trustees and personal representatives increases from 20 per cent to 24 per cent.
• Rates on residential property sales remain unchanged at 18 per cent and 24 per cent.

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

From 6 April 2025, the CGT rate for BADR and Investors’ Relief increases from 10 per cent to 14 per cent. It will then increase further to 18 per cent in April 2026.

Special provisions apply for contracts entered into before 30 October 2024 but completed after that date, as well as for share reorganisations and exchanges where an election is made.

How to reduce your CGT liability

With CGT increasing, tax-efficient planning is more important than ever. Consider these strategies to reduce your liability:

Sell assets before the rate increases

• If you’re planning to sell investments or business assets, consider doing so before 30 October 2024 to lock in the current lower rates.
• Business owners may wish to accelerate plans to sell before 6 April 2025 or 6 April 2026.

Make use of tax allowances

• The CGT annual exemption is just £3,000, so using this before making larger disposals can help reduce tax.
• Transferring assets between spouses (which is tax-free) can double your allowance.

Consider spreading disposals

• Selling assets over multiple tax years may help avoid higher tax brackets and maximise allowances.

Use tax-efficient investments

• Gains made within ISAs and pensions are exempt from CGT, making them a useful shelter for investments.

How we can help manage your CGT liability

With higher CGT rates now in effect and further changes on the horizon, it’s essential to review your investment and business disposal plans.

Acting now could significantly reduce your tax bill, so speak to our team for advice.