From today, 30 October 2024, Capital Gains Tax (CGT) rates will increase to align with current residential property rates. The basic rate of CGT will increase from 10% to 18%, and the higher rate from 20% to 24%.
This increase will also be phased into CGT rates applicable to gains qualifying for business asset disposal relief (BADR) and investors’ relief (IR). These will remain at 10% for the remainder of the current tax year 2024/25 but will increase to 14% from 6 April 2025 until aligning with the new basic rate at 18% from 6 April 2026. The associated lifetime limits of £1 million for BADR has remained, with investors’ relief reducing from the current £10 million to align with the £1 million limit applicable for BADR.
Interested in carried interest?
From 6 April 2025, the rates of CGT applicable to carried interest will increase from 18%/28% to a flat rate for all taxpayers affected, of 32%.
From 6 April 2026, carried interest will see its regime moved fully into the income tax framework to be taxed as trading profits subject to income tax and class 4 National Insurance contributions. Qualifying carried interest will be subject to a multiplier of 72.5%. Amendments will also be made to the income-based carried interest (IBCI) rules.
There are no details about what the ‘multiplier’ means, so we will have to wait for the legislation, but it is perhaps no coincidence that applying a 45% income tax to a figure that has been multiplied by 72.5% equates to an effective tax rate of 32.625%.
What’s next?
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