Chancellor Rachel Reeves has announced notable changes in capital gains tax (CGT), adjusting both lower and higher rates.
- The lower CGT rate has increased from 10% to 18%, while the higher rate rises from 20% to 24%.
- Residential properties’ CGT remains unchanged at 18% and 24%, aligning with the current structure.
- Carried interest’s CGT rate will see a rise to 32% from April 2025, previously set at 28%.
- These revisions accompany the decrease in tax-free allowances, now at £3,000 from £12,300 over recent years.
In a significant move outlined in the Autumn Budget, Chancellor Rachel Reeves announced increases to the capital gains tax rates, with the aim of adjusting the fiscal landscape. The lower rate of capital gains tax has risen from 10% to 18%, while the higher rate has been adjusted from 20% to 24%. These considerable changes underscore the government’s ongoing endeavour to recalibrate the tax structure, ensuring alignment with economic objectives.
Despite these adjustments, the capital gains tax on residential property transactions remains steady at 18% for the lower rate and 24% for the higher rate. This consistency in property-related taxation signifies a strategic decision to maintain stability in the housing market amid broader fiscal reforms.
Another noteworthy change pertains to the CGT on carried interest, which is set to increase to 32% starting in April 2025. Carried interest, previously taxed at 28%, will see this substantial rise as part of the Chancellor’s strategy to target specific financial sectors.
Notably, these tax increases are introduced alongside historical reductions in tax-free allowances. The allowances have been significantly reduced from £12,300 in the 2022/23 financial year to a mere £3,000 presently. This reduction reflects the government’s strategic shift to broaden the tax base and enhance revenue collection.
These modifications in capital gains tax typify the government’s approach to resilient economic management.
