The Autumn Budget and the Impact of CGT Rate Increases

The UK Government’s recent decision to increase the Capital Gains Tax (CGT) rate on gains from the disposal of certain assets has significant implications for investors, property owners, and business owners alike. This budgetary shift could reshape strategies and investment decisions, particularly for individuals with substantial wealth tied up in property or shares.

What is CGT?

CGT is levied on the profit (growth) made from selling assets that have appreciated in value, including property (other than one’s main home), shares, businesses, and valuable collectibles. Until now, the CGT rate has been lower than income tax rates, reflecting an incentive for people to invest in assets and hold them over time. However, the recent budget announcement has raised CGT rates closer to those of income tax, a change justified by the government as a measure to increase tax fairness and boost revenue.

How does this impact taxpayers?

For taxpayers, this increase could result in substantial financial impacts. Depending on the asset type, higher CGT rates mean that a larger portion of profits from the sale of an asset will go to the Government, reducing the net gains available for reinvestment or personal use. Higher CGT rates could lead individuals to adjust their investment strategies.

For property owners, especially buy-to-let landlords, this change could make property investments less attractive, potentially leading to a decrease in the number of rental properties available. Some property owners might choose to hold onto their assets longer to avoid immediate CGT impacts, while others might consider transferring ownership to family members or through trusts to minimize tax exposure. Investors in stocks and shares could similarly be discouraged from frequent trading, opting instead for long-term holdings to delay CGT liabilities.

What to do next?

Considering the increased CGT rate, individuals may need to reconsider their long-term financial strategies. Consulting financial advisors and exploring tax-efficient vehicles like ISAs or pension contributions may become even more essential for those seeking to preserve wealth. The changes also reinforce the importance of advance planning for business exits, inheritance, and retirement, as well-structured strategies will be essential for minimizing the impact of the higher CGT.

For more information, get in touch with one of our advisors here.

The information and opinions contained in this blog are for information only.  They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice.  Before acting on any information contained in this blog, please seek solicitor’s advice from Gilson Gray.