Impact of the Autumn Budget 2024 on CGT & Property Landlords
On October 30, 2024, Chancellor Rachel Reeves presented the Autumn Budget, introducing significant amendments to the Capital Gains Tax (CGT) framework, including adjustments to Business Asset Disposal Relief (BADR). These changes aim to enhance tax revenues and address economic challenges.
Understanding Capital Gains Tax (CGT)
Capital Gains Tax is levied on the profit realized from the sale or disposal of assets that have appreciated in value. This tax applies to various assets, including property (excluding primary residences), shares, and business assets. Prior to the recent budget, CGT rates were set at 10% for basic rate taxpayers and 20% for higher rate taxpayers, with residential property gains taxed at 18% and 28% respectively. The annual tax-free allowance stood at £3,000, having been reduced from £12,300 over the past two years.
Revised CGT Rates and Allowances
The Autumn Budget 2024 introduces an increase in CGT rates:
– Basic Rate Taxpayers: CGT rate increased from 10% to 18%.
– Higher Rate Taxpayers: CGT rate increased from 20% to 24%.
Notably, CGT rates on residential property disposals remain unchanged at 18% and 28% for basic and higher rate taxpayers, respectively. The annual tax-free allowance is maintained at £3,000.
Business Asset Disposal Relief (BADR)
Formerly known as Entrepreneurs’ Relief, Business Asset Disposal Relief allows qualifying business owners to pay a reduced CGT rate on the disposal of all or part of their business. This relief was designed to encourage entrepreneurship by offering a 10% CGT rate on qualifying gains, subject to a lifetime limit. As of the 2023/24 tax year, the lifetime limit was set at £1 million.
