Budget 2024: Increased CGT rates and further whittling of BADR
Andy Wood • October 31, 2024
Budget 2024: Increased CGT rates and further whittling of BADR
Introduction
The focus of pre-Budget speculation (and there was an awful lot!) seemed to be on changes to CGT.
Mrs Reeves did not disappoint, and the CGT changes can be distilled into three parts:
- Changes to main rates;
- Changes to Business Asset Disposal Relief (“BADR”); and
- Changes to the lesser spotted Investors Relief.
Changes to the Capital Gains Tax (CGT) rates
Prior to the Budget, the main rates of Capital Gains Tax (CGT) were 10% (where a gain falls in the basic rate band) and 20% to the extent a gain falls in the higher or additional rate bands.
However, these are changed from 18% to 24% respectively. These match the rates already in place for residential property sales.
As I predicted elsewhere (click here), 24% seemed the obvious rate based on data released by the Government earlier in the year.
Importantly, the change too effect for disposals made on or after 30 October 2024.
Business Assets Disposal Relief – further whittling
Again, I have said, that, prior to the Budget, BADR was a shadow of its former self…
A pale shadow…
A husk..
But, despite that, as I pointed out here,
the data for clobbering this relief further was compelling.
And that is why Mrs Reeves has taken out her fiscal scalpel again.
The rate of CGT for BADR will increase as follows:
- to 14% for disposals made on or after 6 April 2025, and
- to 18% for disposals made on or after 6 April 2026.
From 2026, the maximum benefit of BADR will be 6% on £1m. Although I wouldn’t turn down £60k, it is hardly worth writing home when it comes to such a relief. It is almost as Reeves simply wanted to keep the relief merely as a totem.
Capital Gains Tax — Investors’ Relief
As I say, the lesser spotted relief known as Investor’s Relief.
I say lesser spotted because I can’t ever remember having a serious discussion about this relief with a client. Maybe that says more about me than the relief.
Anyway, Reeves is also neutering this relief by:
Increasing the 10% rate to 14% and 18% in the same stages as BADR; and
reducing the lifetime limit from £10 million to £1 million for Investors’ Relief qualifying disposals made on or after 30 October 2024.
Conclusion
The changes to CGT were largely predictable. I had never subscribed to the talk of equalisation as it made no sense when looking at the data.
I have experienced little practical knowledge of investors relief, but it seems to me that, if one is whittling away the reliefs for involved business owners, it should also be whittled away for mere investors.
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April 6th, 2025 marks the beginning of a major shift in UK taxation. Labour’s new tax reforms have officially scrapped the long-standing non-domiciled (non-dom) tax status — a move that targets wealthy individuals who live in the UK but, under the new non dom regime, have been able to mitigate UK tax on their overseas income and gains. This change spells the end of a tax break that attracted many high-net-worth individuals (HNWIs) to the UK and is already causing ripples across the country’s elite financial circles. The message is clear: if you live here, you pay here. Let's break down what has changed. What Was the Non-Dom Tax Regime? The non-dom tax regime allowed individuals residing in the UK, who claimed their primary home (domicile) to be outside the UK, to avoid UK income and capital gains taxes by not bringing any foreign earnings or gains back into the UK. This system made the UK an attractive location for individuals with international earnings. We covered this in more detail here. What Has Changed? Since 2025-26 tax year, the government has implemented several significant reforms. These reforms include: 1. End of Non-Dom Status All UK tax residents will now owe UK income tax on all global income and gains, regardless of whether these were brought into the country or not. 2. Inheritance Tax (IHT) on Foreign Assets Non-doms could previously avoid UK Inheritance Tax on assets they held outside the UK; now individuals who have lived here for more than four years will be liable for IHT on all their global estate assets. 3. Temporary Reliefs To assist the transition, temporary measures include the following: Tax Year 2025-26 will see a 50% reduction on foreign income tax. Capital Gains Tax (CGT) laws allow us to rebase overseas assets based on their value as of April 2019 for CGT purposes. Temporarily, bringing money from abroad may not incur full tax charges upon entering the UK. Why Has the Government Made These Changes? According to Labour, eliminating non-dom status will provide many advantages: Enhance tax fairness Raise extra funds to support public services Close longstanding loopholes used by the wealthy Rising Tax Bills HNWIs with overseas assets and income will now face significantly increased tax obligations that may have an effect on personal finances, family planning and wealth transference. Making Decisions About Moving Abroad Some individuals are already leaving the UK in order to settle in countries with more advantageous tax regimes. Some common destinations for relocation include: United Arab Emirates (UAE) does not levy income or capital gains tax Switzerland provides fixed annual tax arrangements for its most wealthy citizens Italy - flat tax of EUR100,000.000 on foreign income for new residents Monaco does not levy personal income tax for residents Concerns Raised About Impact Within Industry Concerns are being expressed that this could lead to a decrease in: Investment into UK businesses Jobs funded by private wealth Donations to UK Charities What About Entrepreneurs? Many entrepreneurs utilise non-dom status to reduce tax on international business earnings, however, these changes could require: Establishing headquarters or structures outside the UK Reconsider ownership of intellectual property or company shares An investigation of how profits and dividends are managed is important to ensure long-term growth. What Should Be Done Now? If you or those you work with have been affected, taking immediate steps is key to their safety. Here are a few things you can do. 1. Consult With A Specialist Tax Advisor Every situation varies. Seek tailored guidance from someone familiar with both UK and international tax regulations. 2. Evaluate Your Financial Structures Evaluate how you hold assets - for instance through offshore companies or trusts. Any necessary changes must be implemented for optimal efficiency and compliance purposes. 3. Consider Relocating If the UK's new tax rules no longer suit, you might wish to explore living elsewhere where tax liabilities would be lower. Be sure to carefully consider all legal, financial, and family aspects prior to making any decisions. Summary The changes to the non-dom tax regime mark a profound transformation for those who rely on global income and wealth for tax payments, especially those living abroad. Although intended to increase fairness, these reforms also pose challenges to those accustomed to using it. Now is the time to review your plans, secure your assets, and seek professional guidance. How Can We Assist? At our offices in both the UK and UAE, we assist individuals, entrepreneurs and professional advisors in making well-informed decisions. If you have any queries about this article or need advice then get in touch.