- Increase to 18% and 24% in capital gains tax rates
- Business Asset Disposal Relief Limit Maintenance
- Increase in the rate on carried interest to 32%
In a move that has resonated across the financial sector, UK Chancellor of the Exchequer Rachel Reeves has announced a significant increase in capital gains tax rates. The change affects a range of assets from stocks to cryptocurrencies, marking a new phase in UK tax policy.
Following the announcement made last Wednesday, October 30, the new rates were adjusted to 18% in the lowest bracket, up from a previous 10%, and to 24% in the highest bracket, up from 20%. These adjustments are intended to align the capital gains tax with taxes on real estate transactions, which will remain at the same percentages.
According to Reeves, the changes are strategic to “boost growth, promote entrepreneurship and support wealth creation”, while also seeking to raise revenues to fund public services and restore the country’s finances. The minister stressed that, even with this increase, the UK will still have the “lowest capital gains tax rate of any G7 European economy”.
The new tax regime is not limited to adjustments to traditional tax rates. A specific increase in the rate on carried interest was also revealed, which will rise from 28% to 32%. This rate mainly affects fund managers who profit from investment income.
For entrepreneurs, a breath of relief: the lifetime cap on Business Asset Disposal Relief remains at £1 million, with a rate at 10%, at least until April 2025. Reeves has signalled that this rate could rise to 14% in 2025 and 18% in 2026-27, in a bid to continually encourage entrepreneurial investment while gradually increasing tax revenue.
The Office for Budget Responsibility (OBR) expects these measures to add approximately £2,5 billion to revenues by the end of the forecast period, complementing the £15 billion already raised by the tax last year.