The Autumn Budget: Capital Gains Tax (CGT)
Yesterday afternoon, for the first time in 14 years, the Labour government announced the Autumn Budget. The first female Chancellor in the UK, Rachel Reeves, confirmed significant changes to the UK’s Capital Gains Tax (CGT) regime, aiming to increase tax revenues in line with the Labour government’s redistribution goals.
These changes include the higher CGT rate increasing from 20% to 24% for gains on most assets, other than residential property, while the lower rate rose from 10% to 18% for basic rate taxpayers.
These new rates were applied immediately, namely on disposals made on or after 30 October 2024. This adjustment is seen as aligning the UK’s CGT rates more closely with those in European G7 nations, addressing Labour's objective of equitable taxation across income types, including capital gains from investments, to fund public services effectively.
In addition, the rate of CGT that applies to Business Asset Disposal Relief and Investors’ Relief has increased from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.
Special provisions have been made for contracts entered into before 30 October 2024 but completed after that date for the main rate changes, and for contracts entered into on or after 30 October 2024 for the phased rate change that applies to Business Asset Disposal Relief and Investors’ Relief.
One set of rates that will remain unchanged is the CGT on residential property disposals (18% and 24%).
Whilst the press expected more significant increases, these changes will certainly have an impact on individuals and families across the UK. In view of the changes coming into immediate effect, many taxpayers will feel vindicated in their decision to make disposals before the Budget in order to take advantage of the lower rates.
Overall, this Budget signifies Labour’s move towards higher tax rates on capital to fund public services, while urging investors and landowners to seek professional tax guidance to navigate these updated regulations and mitigate future liabilities.
