Capital Gains Tax rate on disposals of residential property from 6 April 2024
Published 6 March 2024
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This publication is available at https://www.gov.uk/government/publications/capital-gains-tax-changes-to-the-higher-rate-of-tax-on-residential-property-disposals/capital-gains-tax-rate-on-disposals-of-residential-property-from-6-april-2024
Who is likely to be affected
Individuals, trustees and personal representatives who are liable to pay Capital Gains Tax (CGT) on residential property gains. Private Residence Relief (PRR) will continue to apply on disposals of main residences.
General description of the measure
This measure reduces the higher rate of CGT on residential property gains from 28% to 24%. The lower rate will remain at 18%.
Policy objective
Cutting the 28% rate of CGT to 24% is expected to incentivise earlier disposals of second homes, buy-to-let property and other residential property where accrued gains do not fully benefit from PRR. This will generate more transactions in the property market, benefitting those looking to move home or get onto the property ladder.
Background to the measure
This measure was announced at Spring Budget 2024.
Detailed proposal
Operative date
This measure will have effect for chargeable residential property gains (after taking account of PRR) accruing on or after 6 April 2024.
Current law
Gains made on disposals of residential property that do not qualify for PRR are chargeable to CGT at 18% for any gains that fall within an individual’s unused basic rate band and 28% where the chargeable gains exceed the unused part of their basic rate band. Higher rate taxpayers pay 28% on all gains from residential property disposals. This is set out at section 1H of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). For the purposes of section 1H residential property gains are defined at Schedule 1B to TCGA 1992.
Residential property gains accruing to trustees and personal representatives are chargeable at 28%.
Proposed revisions
Legislation will be introduced in Spring Finance Bill 2024 to amend section 1H of TCGA 1992 to reduce:
- the 28% rate for residential property rate gains accruing to individuals to 24%
- the 28% rate for residential property gains accruing to trustees and personal representatives to 24%
The lower rate will remain at 18%.
The 18% and 28% rates of CGT that apply to gains in respect of carried interest will remain unchanged.
Summary of impacts
Exchequer impact (£million)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| -70 | +310 | +350 | +45 | +50 | +5 |
These figures are set out in table 5.1 of Spring Budget 2024 and have been certified by the Office for Budget Responsibility (OBR). More detail can be found in the policy costings document published alongside Spring Budget 2024.
Economic impact
In their March 2024 Economic and Fiscal Outlook (EFO), the OBR estimate that the cut in capital gains tax payable on residential property gains increases property transactions by approximately 2% in the near term, before tapering away over the remainder of the forecast.
Impact on individuals, households and families
This measure will reduce the CGT liability of individuals who have disposed of a residential property interest and, after taking account of PRR where applicable, have a chargeable gain.
This measure is expected overall to have no impact on an individual’s experience of dealing with HMRC it only changes the higher rate of CGT from 28% to 24%. It does not make any other changes.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that this measure will disproportionately impact those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses or civil society organisations as it only affects individuals and trustees who pay CGT in their personal capacity and personal representatives who pay CGT in that capacity on behalf of an individual or an estate.
Operational impact (£million) (HMRC or other)
HMRC will need to make changes to its IT systems to implement this change at a cost in the region of £2 million.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, contact CGT Budget at [email protected].