Policy paper

Capital Gains Tax — rates of tax

Updated 6 November 2024

Who is likely to be affected

Individuals, trustees and personal representatives who pay Capital Gains Tax.

General description of the measure

This measure increases:

• the main rates of Capital Gains Tax that apply to assets other than residential property and carried interest from 10% and 20% to 18% and 24% respectively, for disposals made on or after 30 October 2024
• the rate of Capital Gains Tax that applies to trustees and personal representatives from 20% to 24% for disposals made on or after 30 October 2024
• the rate of Capital Gains Tax that applies to Business Asset Disposal Relief and Investors’ Relief from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.

The rates of Capital Gains Tax that apply to residential property disposals (18% and 24%) will remain unchanged.

There are special provisions for contracts entered into before 30 October 2024 but completed after that date for the main rate changes, and for contracts entered into on or after 30 October 2024 for the phased rate change that applies to Business Asset Disposal Relief and Investors’ Relief. There are also special provisions for share reorganisations and exchanges where an election is made.

Policy objective

This measure forms part of a package of changes to Capital Gains Tax that raise revenue, while ensuring that the UK tax system remains internationally competitive.

Background to the measure

This measure was announced at Autumn Budget 2024.

Information about changes to the rate of Capital Gains Tax for carried interest, which will take effect for carried interest arising on or after 6 April 2025, is covered in the tax information and impact note, Capital Gains Tax: Rates of tax — carried interest.

Information about changes to the Investors’ Relief lifetime limit is covered in the tax information and impact note, Capital Gains Tax: Investors’ Relief — reduction in the lifetime limit.

Detailed proposal

Operative date

The main rate changes will come into effect for disposals made on or after 30 October 2024, and the Business Asset Disposal Relief and Investors’ Relief rate changes will come into effect for qualifying disposals made on or after 6 April 2025.

Current law

Sections 1H and 1I of the Taxation of Chargeable Gains Act 1992 specify the rates of Capital Gains Tax. The appropriate rate depends upon the nature of the asset concerned, the person to whom the gain accrues, and the level of taxable income of the person to whom the gain accrues.

The main rates are:

• 10% for any gains that fall within an individual’s unused basic rate band
• 20% for higher rate taxpayers

Two higher rates apply to residential property disposals. These are:

• 18% for any gains that fall within an individual’s unused basic rate band
• 24% for higher rate taxpayers

Two higher rates apply to carried interest. These are:

• 18% for any gains that fall within an individual’s unused basic rate band
• 28% for higher rate taxpayers

In addition, a 10% rate applies to all disposals that qualify for Business Asset Disposal Relief and Investors’ Relief.

The higher rates of Capital Gains Tax of 20%, 24% and 28% apply to disposals made by trustees of settlements and personal representatives. 

Proposed revisions

Legislation will be introduced in Finance Bill 2024-25 amending sections 1H and 1I of Taxation of Chargeable Gains Act 1992 to increase:

• the 10% rate for basic rate taxpayers to 18% for disposals made on or after 30 October 2024
• the 20% rate for higher rate taxpayers to 24% for disposals made on or after 30 October 2024
• the 20% rate of Capital Gains Tax that applies to gains accruing to trustees and personal representatives to 24% for disposals made on or after 30 October 2024
• the 10% rate that applies to Business Asset Disposal Relief and Investors’ Relief to 14% for disposals made on or after 6 April 2025 and from 14% to 18% for disposals made on or after 6 April 2026

The existing 18% and 24% rates that apply to residential property will remain unchanged. This measure means that it will no longer be necessary to specify separate rates for this purpose.  

The existing provisions under which losses, the Annual Exempt Amount and any unused income tax basic rate band can be used in the most beneficial way will remain in place, with amendments to reflect the changed rates.

Capital Gains Tax that may be due on the disposal of an interest in UK residential property will continue to be payable within 60 days of the completion of the disposal. 

Rules will also be introduced that apply to forestalling arrangements entered into in respect of unconditional but uncompleted contracts before 30 October 2024, and for Business Asset Disposal Relief and Investors’ Relief, where a contract is made from 30 October 2024 to 5 April 2026 and completed from 6 April 2025. In such cases disposals will be subject to the new rates of Capital Gains Tax unless:

a) the parties to the contract can demonstrate that they did not enter into the contract with a purpose of obtaining a tax advantage by reason of the timing rule in section 28 of the Taxation of Chargeable Gains Act 1992

b) where the parties to the contract are connected, that the contract was entered into for wholly commercial reasons

Where a) or b) apply a statement must also be made where the gain exceeds £100,000.

Two additional rules will apply in certain circumstances where an election is made to disapply the Capital Gains Tax share reorganisation provisions for the purposes of claiming Business Asset Disposal Relief.

The first rule applies in the case of a reorganisation of the shares of a single company before 30 October 2024 where the shareholder continues to meet the conditions for claiming Business Asset Disposal Relief on the shares they hold on that date. The rule means that the gain resulting from the making of an election will be chargeable at the Capital Gains Tax rates applying at the date the election is made. The rule will also apply to reorganisations on or after 30 October 2024 for the phased increase in the Capital Gains Tax rate for Business Asset Disposal Relief gains.

The second rule applies in the case of a reorganisation resulting from an exchange of shares for those in another company before 30 October 2024. The rule means that the gain resulting from the making of an election will be chargeable at the Capital Gains Tax rates applying at the date the election is made where either of these conditions are met:

• the companies involved in the exchange are owned or controlled by substantially the same persons
• the persons who held shares in the first company hold a greater percentage of the shares in the company that issued the shares in exchange for them and, at the time of the election, the shareholder continues to meet the conditions for claiming Business Asset Disposal Relief on a disposal of their new shares

These rules will also apply to share exchanges on or after 30 October 2024 for the phased increase in the Capital Gains Tax rate for Business Asset Disposal Relief gains.

A separate rule will apply where an election is made to disapply the Capital Gains Tax share reorganisation rules in order to claim Investors’ Relief. Where, on or after 30 October 2024, the shareholder continues to meet the conditions for claiming Investors’ Relief on their shares and an election under section 169VT of the Taxation of Chargeable Gains Act 1992 is made on or after 6 April 2025 then the share disposal is to be treated as taking place at the time the election is made, meaning that the new Capital Gains Tax rates will apply. This rule will also apply to reorganisations on or after 30 October 2024 for the phased increase in the Capital Gains Tax rate for Investors’ Relief gains.

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
+90	+1,440	+1,370	+1,350	+2,180	+2,490

These figures are set out in Table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

The measure will increase the Capital Gains Tax liability of persons who have made disposals of assets and have made a chargeable gain other than residential property and carried interest. 

This measure will impact on an estimated 264,000 individuals in 2025 to 2026 who will pay more Capital Gains Tax as a result of the rate increases. For the 2024 to 2025 tax year affected taxpayers will be required to identify gains made before and after 30 October 2024 to determine the correct rate of Capital Gains Tax when completing their tax return.

This measure is expected to increase individuals’ levels of administration when dealing with HMRC for the latter half of the 2024 to 2025 tax year, as changing the rate schedule within the tax year cannot be fully integrated into the self-assessment calculation, so customers will have to take extra steps for any gains made on or after 30 October 2024. HMRC will provide guidance and the tools to support customers to calculate the Capital Gains Tax that is due. From the 2025 to 2026 tax year there will be no additional burdens as the rate changes will be fully reflected in HMRC’s guidance and online tools.

This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

Capital Gains Tax rate changes apply regardless of an individual’s protected characteristics, and equality impacts will reflect the composition of the Capital Gains Tax population. Where protected groups are overrepresented, the measure will have a disproportionate impact on that group.

Those aged between 45 to 74 represent 65% of people impacted, with those aged between 55 to 64 particularly overrepresented at 26% of the affected population. Males (58%) are overrepresented in the population compared to females (42%). HMRC will provide assisted digital support where this is needed and will also make alternative arrangements for digitally excluded customers.

HMRC do not hold information about the other protected characteristics of these individuals, so we are unable to assess impacts for those in other 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 Capital Gains Tax in their personal capacity and personal representatives who pay Capital Gains Tax 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 £600,000.

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 the Capital Gains Tax policy team by email: [email protected].