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Capital Gains Tax (CGT) Rates
The main capital gains tax rates increased to align with residential rates from 30 October 2024. The new rates are 18% for basic rate taxpayers and 24% for higher rate taxpayers. Before this, the rates were 10% and 20% for non-residential gains. Residential property rates remain unchanged. Contracts signed before 30 October 2024 but completed later may qualify for the old rates.
Many landlords and second-home owners were relieved that residential rates did not rise. However, those considering selling should act before 5 April 2026, as future changes remain uncertain. Shareholders with gains above £3,000 in the basic rate band now pay 8% more, while higher earners face a 4% increase. Acting before 2025/26 is crucial to minimize tax liabilities and stay ahead of potential changes.
Business Asset Disposal Relief (BADR)
BADR allows qualifying business owners to pay reduced CGT on gains. The rate remains 10% until 5 April 2025, rising to 14% in 2025/26 and 18% from 6 April 2026. Gains up to the £1 million lifetime limit qualify. Selling a business before 6 April 2025 could save up to £140,000 on gains of £1 million or more, providing a strong incentive for business owners to act now.
Investors’ Relief
The lifetime limit for Investors’ Relief was slashed from £10 million to £1 million on 30 October 2024. Gains taxed under this relief are 10% in 2024/25, rising to 14% in 2025/26 and 18% from 6 April 2026.
Limited Liability Partnerships (LLPs)
It’s crucial for LLP members to understand the new rules that apply to contributing assets. From 30 October 2024, a CGT charge arises if an LLP liquidates and assets are distributed to members or connected parties. The gain is based on the asset’s value when contributed. This understanding will ensure that members are prepared for any potential tax implications.
Carried Interest
A single CGT rate of 32% applies to carried interest from 6 April 2025. For 2024/25, rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers. A new income tax framework for carried interest begins in 2026.
Pension Funds and Death Benefits
From 6 April 2027, unused pension funds and death benefits will be included in estates for inheritance tax. Pension scheme administrators will handle reporting and tax payments.
This budget introduces notable CGT changes but spares residential rates. Acting before 2025/26 can minimize tax liabilities for business owners and investors.