Budget 2024: Capital Gains Tax Increases

Helen Mather, Partner

Increases have taken place with immediate effect but there is still time to take advantage of the current BADR rate

Labour’s first budget since 2009 has been delivered today with a raft of changes to many aspects of the financial planning of the UK. Significant changes to Inheritance Tax and National Insurance Contributions for employers have grabbed much of the attention and headlines, but some of the changes will also have a large impact on anyone looking to sell a business or shares in a business in the UK.

Changes to the rate of Capital Gains Tax (CGT) were widely anticipated and drove many sellers to complete their M&A transactions pre-budget to ensure they were taxed at pre-budget rates.

These sellers are likely now relieved and pleased with their decision as the rate of CGT payable on qualifying gains (including on the sale of shares in a company) has increased with immediate effect for disposals made on or after 30 October 2024 from 10% to 18% on the lower rate and 18% to 24% on the higher rate.

With the new CGT rates being applied as of today, Chancellor Rachel Reeves has given many business owners considering an exit pause for thought and may lead to some holding on for more favourable exit conditions.

Business Asset Disposal Relief (BADR), previously known as Entrepreneurs Relief, reduces the CGT rate payable on a chargeable gain to a flat 10% on the first £1m of gains for qualifying entrepreneurs. The government has decided to maintain this at 10% until April 2025, however the rate of CGT that applies to BADR will increase 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.

There is still time between now and 5 April 2025 for those who are considering selling their businesses to take the leap and sell at the current and more favourable BADR rate of 10%. This will be particularly useful for owner-managed businesses and SME’s, whose owners are looking to make the best of what could be their only business sale in their lifetime.

If you’re looking to buy or sell a business or shares in a business, would like to understand the processes involved or how these changes may affect you please speak to a member of our expert Corporate team. Please contact us on 0161 832 3434.