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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