Will you pay more Capital Gains Tax as a result of the Autumn Budget?

Rachel Reeves’ announcements were much anticipated, with several forecasters saying the chancellor would bring Capital Gains Tax (CGT) rates in line with Income Tax, among many other predictions.

When the day came, in fact, Reeves did raise taxes. She said that the levies announced would raise £40 billion for the public finances and help the government to fund important services. But the increases she announced – including catching pensions within the Inheritance Tax (IHT) net from 2027– were not as harsh as many experts predicted ahead of time.

One of the most seismic changes Reeves announced was an increase to some CGT rates with immediate effect. While the chancellor did not bring CGT in line with Income Tax, as expected, she did raise rates along with reducing key reliefs for business owners disposing of taxable assets.

In this article, you will find out:

• What CGT is and who pays it
• How much taxpayers could be liable for after the increase
• Tips for reducing your CGT bill where possible.

Keep reading to find out all this and more.

How Capital Gains Tax works, and who might pay it

CGT was first introduced in 1965 by Labour chancellor James Callaghan. Before this, investors and property owners weren’t taxed on their gains in this way.

Nearly 60 years later, CGT is still in place, having been through several reforms to take the shape it does today.

The rate of CGT you pay depends on your marginal rate of Income Tax. The tax is levied on profits earned from the sale of:

• Property that is not your main home, unless your main home is very large, you’ve used it for your business, or you’ve let it out
• Non-ISA shares, such as those held in a General Investment Account (GIA)
• Belongings worth more than £6,000 excluding your car
• Business assets.

There could be several instances in your life in which you’ll be required to pay CGT.

For example, when you retire, you may begin to decumulate your investment portfolio to fund the lifestyle you’ve always dreamed of. Selling shares you own within a business, shares outside of your pensions and ISAs, and/or part of your property portfolio, could all be on the cards.

Or, you and your spouse could decide to sell your second home after your children fly the nest, in order to travel more widely and explore new destinations.

Likewise, if you are a business owner and decide to sell the company to take on a new project midway through your career, you could incur CGT profits earned from the sale.

Crucially, CGT is only levied on profits you earn from disposing of assets, not the total sale amount. For instance, if you bought your second home for £200,000 and sold it for £300,000, you would normally pay CGT on the £100,000 gain.

There is also an Annual Exempt Amount, below which you can make gains without paying CGT. As of the 2024/25 tax year, this stands at £3,000, down from £6,000 in 2023/24 and £12,300 in 2022/23. So, your £100,000 gain would benefit from a £3,000 reduction, if you hadn’t already used this allowance in the same tax year.

The Annual Exempt Amount is a “use it or lose it” allowance, meaning you can’t bring forward your unused balance from previous tax years. More positively, it is an individual allowance, meaning jointly owned assets could effectively benefit from double the relief.

The key changes to Capital Gains Tax made in the 2024 Autumn Budget

On 30 October 2024, Rachel Reeves announced that non-property CGT rates would rise in line with property rates, with immediate effect. Assets disposed of on or after 30 October would be subject to the new, higher rates.

Previously, non-property gains were normally charged as follows:

• 10% for basic-rate taxpayers
• 18% for higher- and additional-rate taxpayers.

Taxable property gains were usually charged at:

• 18% for basic-rate taxpayers
• 24% for higher- and additional-rate taxpayers.

Now, both types of asset are subject to the same rates: 18% (basic rate) and 24% (higher rate).

What’s more, the chancellor made changes to several reliefs that usually apply to business owners and investors.

Business Asset Disposal Relief and Investors’ Relief

Before the Budget, most business owners or shareholders could dispose of their business assets, up to a lifetime limit of £1 million, while receiving Business Asset Disposal Relief (BADR), which lowered their rate of CGT to 10%.

Additionally, Investors’ Relief (IR) is offered to those who invest in businesses that are not listed on the stock market, also bringing eligible investors’ rate of CGT down to 10%.

However, while she kept the lifetime limit of £1 million in place for BADR, the chancellor announced that the IR lifetime limit would fall from £10 million to £1 million with immediate effect.

Plus, while the BADR and IR rates will continue to be charged at 10% for now, this will rise to 14% in the 2025/26 tax year and 18% in 2026/27. The chancellor says this will raise £2.5 billion by the end of the forecast period.

Carried interest

CGT on carried interest, which is paid by private equity managers, is rising to a flat rate of 32% in April 2025. It was previously charged at 18% at the basic rate and 28% at the higher rate.

3 practical tips for reducing your Capital Gains Tax bill

Now that rates have risen for many, you might be beginning to focus on reducing your CGT bill now and in future tax years.

Let’s take a look at three practical ways to do so.

1. Offset capital losses against capital gains

Many people aren’t aware that if you make a gain in the present tax year and are set to pay CGT, you can offset this gain against losses made in previous tax years.

For instance, if you sold business shares at a loss of £2,000 in 2022/23, and made a gain of £4,000 on the sale of shares from a GIA in 2024/25, you could reduce your taxable gains to £2,000. You can do this through self-assessment each tax year.

2. Transfer assets to your spouse to maximise tax efficiency

As you read earlier, your CGT Annual Exempt Amount is individual. So, if you’ve already used yours for this tax year but your spouse or civil partner has not, you could transfer the asset to their name before disposing of it, in order to maximise tax efficiency.

There are some complications to doing this – it’s not always possible to put business assets in a spouse’s name, for instance – but if it’s available to you, transferring assets to a spouse could be a viable option for reducing CGT.

3. Work with a Kellands financial planner

Where tax is concerned, you could make a significant difference to your wealth by working with a Kellands financial planner.

Indeed, if you’re approaching retirement, you could be set to pay more and more tax in the coming years. Analysis of a freedom of information request from HMRC, published by Quilter, reveals that 1 in 5 pensioners is set to be paying higher-rate Income Tax by the 2027/28 tax year. More than one-third of these will be over 70.

With the recent increase of CGT rates, plus the freezing of IHT nil-rate bands and other important thresholds, you and your family could find yourselves paying more and more tax over the years.

While financial planning can’t always reduce your tax bill, we can ensure that no stone is left unturned, presenting a full array of options that could help you achieve greater financial freedom. Our experts are well-versed in helping high earners, business owners, and those with a complex set of assets, to manage their estates and continue building wealth for the future.

What’s more, your Kellands financial planner will be on hand to help you adapt to any future policy changes that this or any future government announces.

Get in touch

To speak to one of our financial planners about CGT, or any other financial matter, email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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