Capital Gains Tax (CGT) was a sizable target for the Chancellor in the Autumn Budget, though changes were perhaps more modest than anticipated.
With immediate effect, an increase was announced in respect of both the basic and higher rate of CGT. The basic rate, paid by basic rate taxpayers, was upped from 10 per cent to 18 per cent, whilst the rate paid by higher-rate taxpayers has risen to 24 per cent from 20 per cent.
Worth noting is that the existing rates of CGT for residential property sales remain unchanged (18 per cent for basic rate taxpayers, and 24 per cent for higher-rate taxpayers), and so now match the rates of CGT to be paid on other assets.
Ultimately, what this means is that you will see an increase in the tax you pay on qualifying gains when you sell most assets – including business shares.
What about business reliefs?
Business owners who sell their businesses have typically benefitted from Business Asset Disposal Relief (BADR) – formerly known as Entrepreneurs’ Relief – which reduces CGT to a rate of 10 per cent on qualifying gains, regardless of the individuals ‘marginal rate of tax.
Fortunately, BADR remains in place as it is for disposals up to 5 April 2025, but the relief provided will be reduced when rates rise from 10 per cent to 14 per cent in April 2025, and to 18 per cent in April 2026.
Can I plan around CGT increases?
Despite the changes, rates of CGT still sit far below the highest rates of income tax and so taxpayer behaviour is unlikely to change radically as a result of the latest Budget.
The Chancellor introduced the changes to CGT rates with immediate effect, from 30 October 2024, and so people with intent to sell personal assets were left with little time to plan.
However, business owners considering an exit have an opportunity to bring their business sale forward, should circumstance allow, to take advantage of better BADR rates.
We recommend that you speak to an experienced accountant or tax adviser before undertaking any tax planning, or commencing the process of selling your business.
To discuss the impact of the Budget announcements on your tax affairs, whether business or personal, contact a member of our team today.
