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Another UK prime minister (7th in 10 years) + another UK chancellor (8th in 10 years) = ????
Another UK tax-raising budget? It’s anyone’s guess, but if the last few years and the limited policy speeches given by new premier Andy Burnham are anything to go by, chances are the ever-evolving tax landscape is set to continue to, well, evolve. Thankfully, there is still time before the next budget to make sure personal finances are in as good order as they can be.
Admittedly, different areas of tax-planning require different lead times. Inheritance tax planning can involve multiple steps, for example. Think the possible need to seek professional advice, to update wills or to set up trusts and other vehicles. Other areas of financial planning, however, have relatively short lead times. Capital gains tax (CGT) falls in this second camp. After all, it doesn’t take long to crystallise a gain or a loss.
So, with a potential tax-raising budget on the way, now might be a good time to take any CGT action you may already be planning. Why CGT in particular? Because previous changes to the CGT regime have come into force at speed.
The 2024 Budget included increases in the CGT rate on investments for basic-rate taxpayers (to 18% from 10%) and for higher-rate and additional rate taxpayers (to 24% from 20%). When did these changes come into effect? On the day they were announced!
With that in mind, a question or rather two questions. Are your personal finances in order? And specifically in terms of CGT, are there any outstanding actions that need to be taken or any annual allowances still available that need to be utilised?
A promise
Now this article will not be speculating on what the UK’s new prime minister and his chancellor may or may not do when it comes to setting out the new government’s spending and tax plans at the next budget. As the run-up to each of the past two budgets has shown, trying to second-guess tax rises is something of a fool’s errand. Remember Chancellor Rachel Reeves’ speech just days before the 2025 Budget talking up the need for "necessary choices" and that we all have to "contribute", as she prepared the country for a manifesto-busting income tax hike? Come budget day and increases in personal income tax rates were nowhere to be seen, though many allowances remain frozen.
An assumption
Instead, this article will make one assumption: that like all budgets that have gone before, the upcoming iteration (presumably in the autumn) will see changes made to the tax landscape. What these may be and which taxes will be affected are anyone’s guess. Time will tell.
A brief history lesson
What we do know is that the CGT regime has seen considerable change in recent years. Rewind to the 2022/23 tax year and the annual personal CGT allowance stood at £12,300. A year later it was cut to £6,000 and a year after that it was halved to £3,000 where it currently stands today.
Tax rates have seen considerable change too and not just the main rates. Up until April 2024, the following CGT rates applied:
- 10% for basic-rate taxpayers (not including residential property gains and carried interest gains)
- 20% for higher-rate and additional rate taxpayers (not including residential property gains and carried interest gains)
- 18% for basic-rate taxpayers for residential property gains and carried interest gains
- 28% for higher-rate taxpayers for residential property gains and carried interest gains
- 20% for trustees (not including residential property gains)
- 28% for trustees for residential property gains
- 20% for personal representatives of someone who has died (not including residential property gains and carried interest gains)
- 28% for personal representatives of someone who has died for residential property gains and carried interest gains
- 10% for gains qualifying for Business Asset Disposal Relief
Four different rates in total, across nine scenarios. Compare that with today:
- 18% for basic-rate taxpayers
- 24% for higher-rate and additional rate taxpayers
- 24% for trustees
- 24% for personal representatives of someone who has died
- 18% for gains qualifying for Business Asset Disposal Relief or Investors’ Relief
Four rates have become two across five distinct scenarios. In terms of rate level, the direction of travel for the vast majority of investors in recent years is clear - upwards.
A message
Without falling into the speculation rabbit hole that is musing about what (if anything) might happen to CGT in the upcoming budget, the message for those planning to crystalise gains or losses this year (and think change could be on the way) is this: it could pay to take action sooner rather than later.
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This material is not tax, legal or accounting advice and should not be relied on for tax, legal or accounting purposes. Quilter Cheviot Limited does not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting adviser(s) before engaging in any transaction.
