Autumn Budget 2024 – Capital Gains Tax
Capital Gains Tax (CGT) has seen several changes in the last few years. The annual allowance being the amount of gains that can be made each year without paying any tax, has been falling. The allowance was £12,300 in 2022 before falling to £6,000 in 2023 and since 6 April it is lower again at £3,000.
8th November 2024
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Gavin Jones See profile
From 30 October, disposals incurring CGT at the basic rate will incur 18% tax (up from 10%) and for higher rates it will be at 24% (up from 20%).
This brings the CGT rates back in line with residential property CGT rates for the first time since 2016.
Reducing tax liabilities is a key financial planning objective. Many of you will have most of your investments wrapped in pensions and Individual Savings Accounts (ISAs) where unlimited gains can be made without giving rise to a tax charge.
Where investments are held outside of pensions and ISAs, it is increasingly difficult to avoid incurring CGT. As a result, and depending on your circumstances and size of investment, we may consider other tax wrappers and in particular onshore and offshore bonds.
These have the ability to defer some or all taxes over time, with a potential tax payment only falling due when you make withdrawals above a certain level or once the bond is encashed. The tax considerations of such bond wrappers also have to be balanced with their increased complexity and cost.
Your financial planner will be able to determine whether the use of a bond wrapper may have a role to play in your financial planning.
BADR (formerly called Entrepreneurs’ relief) and Investors’ relief (that applies to business angels or unconnected investors into businesses) are special rates of CGT for those that sell qualifying businesses.
Rates of CGT for BADR and Investors relief will remain for qualifying gains at 10% on disposals until 5 April 2025. On 6 April 2025 tax rate will increase to 14% and then on 6 April 2026 it will increase to 18%.
The lifetime limit for Investors’ relief will reduce from £10 million to £1 million for disposals on or after 30 October 2024. The lifetime limit for BADR has been £1 million since 2020.
Our tax specialists will be able to answer any questions you may have about these rates of CGT or the practicalities of selling your business.
If you have any questions, or want to discuss your individual circumstances with an Old Mill financial expert, please do get in touch by clicking here…