Autumn Budget 24: Labour raises CGT lower and higher rates

CGT on residential property unchanged

Chancellor Rachel Reeves has raised the lower rate of capital gains tax (CGT) from 10% to 18%, and the higher rate of CGT from 20% to 24%.

The rises introduced by the chancellor are up from 10% and 20% for the lower and higher rates, respectively.

In her Autumn Budget today (30 October), Reeves said that CGT on residential property will remain unchanged at 18% and 24%.

In addition, Reeves said she will increase CGT rates on carried interest to 32% from April 2025, up from 28% as it currently stands.

The hike in CGT rates comes on top of the slashing of tax-free allowance over the past years from £12,300 a year in 2022/3 to only £3,000 this year.

However, the hike in CGT rates introduced today is lower than earlier reports this month from The Guardian, suggesting Treasury officials were taking into consideration a rise in CGT rates ranging from 33% to 39%.

Prime Minister Keir Starmer dismissed those reports at the time as “wide of the mark” at the time.

From the despatch box, Reeves said “this means the UK will still have the lowest CGT rate of any European G7 economy”.

The CGT overhaul was expected by many as part of the Labour party’s plans to bolster government coffers to patch the £22bn fiscal hole in public finances inherited from the former Tory government.

In late August, Prime Minister Keir Starmer argued that people will have to “accept short-term pain for long-term good”, and that those with the “broadest shoulders should bear the heavier burden”.

Alex Ranahan, tax reporting analyst at Financial Software, said that the Chancellor’s decision to hike CGT rates today “does not come as a surprise given the strength of the rumours in the lead up to this Budget”.

“Her decision to delay the rate change gives investors time to get their affairs in order and fully consider their options before making a decision on their assets,” Ranahan said.

“Many investors will take advantage of this year’s lower tax rates and sell. This should result in a substantial bump in tax revenue for the Treasury this tax year.

“For future years, we will have to wait and see how investor behaviour changes. My best guess is that CGT receipts will not see a substantial dip given the shrunken annual exempt amount,” according to Ranahan.

Sorin-Andrei Dojan (Professional Adviser)

Retirement ProfessionalsAutumn Budget 24: Labour raises CGT lower and higher rates