Autumn Budget 2024: Capital Gains Tax update

Following months of speculation, at the Autumn Budget on 30 October 2024, the government announced that legislation will be introduced in the Finance Bill 2024-25 to give effect to the following changes to the UK capital gains tax (CGT) regime.

1. Immediate CGT rate increases

For disposals made on or after 30 October 2024, the main rate of CGT for basic rate taxpayers has increased from 10% to 18% and the main rate of CGT for higher and additional rate taxpayers has increased from 20% to 24%. This now aligns the rate of tax on property with other assets, with the exception of carried interest (see below).

The main rate of CGT that applies to trustees and personal representatives has also increased from 20% to 24% for disposals made on or after 30 October 2024.

2. CGT date of disposal for unconditional contracts

A specific provision of the CGT legislation (section 28(1) TCGA 1992) provides that the date of disposal of an asset under an unconditional contract is the date the contract is made, not the date of transfer of the asset. However, the immediate increase in CGT rates announced at the Autumn Budget is accompanied by anti-forestalling legislation which applies to unconditional contracts entered into before 30 October 2024 where completion (i.e. the transfer of the asset) occurs on or after that date. The anti-forestalling legislation will not apply where completion of the unconditional contract occurred prior to 30 October 2024.

If the anti-forestalling legislation applies to an unconditional contract, the legislation will treat the disposal of the asset as taking place at the time that the asset is transferred (and not at the time the contract is entered into) for CGT purposes. Since that date will occur on or after 30 October 2024, this means that the increased rates of CGT will apply to the disposal.

Significantly, the anti-forestalling legislation will not apply to an unconditional contract entered into before 30 October 2024, but completed on or after that date, if it is an “excluded contract”. A contract will be an “excluded contract” if: (a) obtaining an advantage by reason of the application of section 28(1) TCGA 1992 was no purpose of entering into the contract; and (b) where the parties to the contract are connected persons, the contract was entered into wholly for commercial reasons.

For an unconditional contract to be treated as an “excluded contract” the transferor must make a claim including a statement when reporting the disposal to HMRC that the contract meets the conditions set out above (unless, broadly, the chargeable gain on the disposal does not exceed £100,000).

3. Business Asset Disposal Relief

For disposals made on or after 6 April 2025, the CGT rate that applies to Business Asset Disposal Relief (BADR) will increase from 10% to 14%. The rate will increase further to 18% for disposals made on or after 6 April 2026.

Anti-forestalling legislation will apply to the increase in the CGT rates for BADR so that:

• if an asset is transferred on or after 6 April 2025 under an unconditional contract made either: (a) before 30 October 2024; or (b) on or after 30 October 2024 but before 6 April 2025, the disposal will be treated as taking place at the time the asset is transferred (not at the time the contract is made) unless the contract is an “excluded contract”. This means that either the 14% or 18% CGT rate will apply (depending on the date of transfer);
• if an asset is transferred on or after 6 April 2026 under an unconditional contract made at any time in the 2025-2026 tax year, the disposal will be treated as taking place at the time the asset is transferred (not at the time the contract is made) unless the contract is an “excluded contract”. This means that the 18% CGT rate will apply.

4. Investors’ Relief

The current lifetime limit for Investors’ Relief will be reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. In addition, for disposals made on or after 6 April 2025, the

CGT rate that applies to Investors’ Relief will increase from 10% to 14%. The rate will increase further to 18% for disposals made on or after 6 April 2026.

Anti-forestalling legislation applies to the Investors’ Relief rate increases in the same way as it applies to the BADR rate increases.

5. Taxation of carried interest

From 6 April 2025, the capital gains tax rate for carried interest will be increased to 32%. This change is one of a package of reforms to the tax treatment of carried interest. From April 2026 a revised tax regime will be introduced meaning that carried interest will be treated as trading profits and subject to income tax and Class 4 National Insurance Contributions. It is expected that a lower effective income tax rate will apply to certain “qualifying” carried interest - further details are awaited.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.