Key Changes to Capital Gains Tax and Calculator Tool

The Autumn Budget brought many changes around taxation, however, one of the bigger changes that Chancellor Rachel Reeves announced was various changes to the Capital Gains Tax rates. These changes align Capital Gains Tax with Income Tax rates. So, what has changed?

The main changes are:

Capital Gains Tax rate increases: 

• For the lower rate, CGT has risen from 10% to 18%
• For the higher rate, CGT has risen from 20% to 24%
• Importantly, this applies to any disposals made on or after the 30th of October 2024.

Business Asset Disposal Relief:

• The rate of Capital Gains Tax that applies to Business Asset Disposal Relief (BADR) and Investors’ Relief is increasing 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.
• However, the £1 million lifetime limit for BADR remains unchanged. 
• This effectively means that from 6th April 2026, the maximum lifetime saving for BADR will be £60,000, being the 6% difference between the top rate of 24%, and 18% of your £1 million lifetime allowance.

These are significant increases, but not at the scale first feared when there was commentary suggesting these could be brought into line with income tax rates.  Instead, the general CGT rates have been aligned with those applicable to residential property.  The annual exempt amount also remains unchanged at £3,000.

What does this mean for you as a business owner?

• If you are looking at selling things such as assets, shares or land you will be faced with increased CGT costs.  You can use our Capital Gains Tax calculator to find out how much extra you could be due to pay, at the updated rates announced in the autumn Budget. To download the free calculator, please fill out the form here.
• If you are considering gifting shares or business assets, you may be able to hold over any gains as previously, so as to avoid triggering a CGT liability; however there may be wider inheritance tax implications to consider under the new rules.  We would therefore recommend reaching out to your tax adviser before doing this to ensure optimum tax efficiency. 
• Planning to exit your business? If you are looking to exit your business, we recommend strategically starting this process now to benefit from the current lower rates, ahead of the changes to the BADR rates in April 2025. To get the ball rolling on this process, book in an initial chat with one of our tax advisers here.

Use our Capital Gains Tax calculator to find out how much you could be due to pay with the increased rates announced in the Autumn Budget

Download Here

Following these changes, we strongly recommend business owners consult with professional tax advisers to help optimise tax efficiency and ensure that business exits or the selling of shares is done in the most effective and tax-efficient way possible.
 

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Please note: This article is provided for information only and was correct as at time of writing (07/11/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.