Budget October 2024 - Capital Gains Tax

There was speculation before the Budget that Capital Gains Tax (CGT) rates would be rising significantly. Although increases were announced, they were not as severe as anticipated.

Rate changes were applied with immediate effect, from 30 October 2024. Effectively the CGT rates applicable for the sale of ‘other assets’ that include commercial property, shares and other investments not held within an Individual Savings Account (ISA), and business assets will increase from 10% / 20% (basic rate / higher rate) to 18% / 24% (basic rate / higher rate). These increased CGT rates are now in line with the CGT rates applied to gains made on the sale of residential properties (excluding principal private residences).

The CGT annual exemption remains at £3,000. No CGT is therefore due if total chargeable gains made in a tax year are below £3,000.

Tax planning – annual ISA allowances remain at £20,000 for Stocks and Shares and Cash ISAs and £4,000 for Lifetime ISAs. Investments held within ISAs are ‘tax free’ in that no income tax is payable on interest or investment income earnt and any capital gains made are free from CGT.

Business Asset Disposal Relief (BADR)

The rates upon which business owners pay CGT on the eventual sale of their business will also increase over the next couple of years. Those business owners who are eligible to claim BADR (previously known as Entrepreneur’s Relief) benefit from a 10% rate of CGT up to a lifetime limit of £1 million of gains. For the 2025/26 tax year, the CGT rate applied to the gain on eligible business assets will increase to 14%, then up to 18% from 6 April 2026, aligning with the basic rate of CGT.

Tax planning – the timing of business sales over the next couple of years will be crucial in securing a lower rate of CGT for those eligible for BADR.