Budget 2024 – Hike in Capital Gains Tax and Business Asset Disposal Reliefs

Budget 2024 – Hike in Capital Gains Tax and Business Asset Disposal Reliefs

The lower and higher rates of capital gains tax (CGT) were increased from 30 October 2024.

Less than 1% of adults in the UK contribute to CGT, with £572m being collected in the last quarter.

There are only two rates for CGT, the lower rate of 10% will rise to 18%, while the higher rate of 20% will rise to 24%. This is the first time CGT rates has been significantly changed since 2016, when the top rate was slashed from 28% to 18%. 

For business asset disposal relief (BADR) and investors relief, these will both increase over time to match the lower rate, being increased to 14% from April 2025, then to 18% in April 2026.

This increases come into effect on top of the slashing of the tax-free allowance over the past couple of years from £12,300 a year in 2022/23 to just £3,000 in the current tax year. Investors also have to cope with the fact that frozen income tax thresholds have pushed more people into higher rate tax – automatically pushing up their capital gains tax rate.

The Treasury has predicted these increases will increase CGT receipts by £90m for the rest of this year. From 2025 this rises to £1.44bn, then decreasing slightly to £1.37bn in 2026/27, and to £1.35bn in 2027/28. This then increases to £2.18bn in 2028/29 and to £2.49bn in 2029/30. A huge increase to CGT receipts of £9.9bn over five years.

There was however one positive here, in that the rate of CGT for residential property disposals of 18% and 24% will remain the same.

The rise on CGT is expected to impact 264,000 people in 2025/26, but anyone liable to CGT in this financial year will have to assess their gains for before and after 30 October 2024 to ensure their tax returns are correct.

If you need help with your self assessment tax return, please get in touch with us here at Kennedys Accounting and we will be pleased to assist.