Capital Gains Tax (CGT) Increased – Budget 2024

Post-October 2024 Budget: Capital Gains Tax                       – What Does It Mean for You?

With the recent budget updates, many may wonder what changes to Capital Gains Tax (CGT) could mean for them. This article focuses on the key adjustments in CGT rates and allowances, with tax tips to help you make the most of these changes.

Capital gains tax (CGT) rates increased from 30 October 2024

Higher rates will apply to gains crystallised on 30 October 2024 or after. Previously, the tax rate that applied to capital gains (apart from on residential properties) was 10% if the gain fell within the basic rate band of £50,270, or 18% if it fell in the higher or additional rate band. These rates have been increased to 18% and 24% respectively.

The tax rates on gains arising on the sale of residential property are not changing and remain at 18% and 24%. This means that moving forward the rates arising on all capital gains will now be the same.

How do you determine which tax rate applies to you?

First you need to calculate all other taxable income.  You then add the taxable capital gain (total gains made less the annual allowance of £3,000) and if this falls within the basic rate band of tax (currently £50,270) then the gains will be taxed at the lower rate of either 10% or 18% (depending on when the gain arose; before or after 30 October).

Note that sales of the following items are not subject to CGT:

  • Cars
  • Personal items such as jewellery, art, antiques, coins, stamps, with a value of £6,000 or less per item
  • Stocks and shares held in an ISA or PEP (personal equity plans were discontinued in 1999 and replaced by ISAs but some may still be in existence)
  • Government gilts
  • Premium bonds
  • Lottery, pools or betting winnings
  • Items with a lifespan of less than 50 years such as clocks, watches and machinery

Tax tip

  • The annual CGT allowance of £3,000 is staying, which means you can realise capital gains of up to this level each tax year and pay no tax. Consider utilising this allowance every tax year.
  • Transfer shares to your spouse or civil partner. These transfers are tax free and means both of you can utilise the £3,000 allowance.
  • Utilise the annual ISA allowance of £20,000. All income and gains arising from these are tax free. You can invest the £20,000 in either a cash ISA, stocks and shares ISA or Lifetime ISA, or a combination of these. In addition, parents can pay up to £9,000 into a Junior ISA for each child.
  • The maximum amount you can pay into a Lifetime ISA each tax year is £4,000, and this forms part of the £20,000 annual allowance. The government add a 25% bonus to the amount saved in a Lifetime ISA every year, in addition to interest, which makes this type of account particularly attractive. The savings can be used to buy your first home or withdrawn at age 60 or over. You can only open one if you are aged 18 to 39.

Unlock the Full Potential of the Budget with Competex:

The budget has introduced some significant changes. At Competex, we break down the key changes and provide advice on how to use them to your advantage. Whether it’s for your personal taxes or business planning, we’re here to help you navigate the complexities.

For further information, please contact us at info@competex.co.uk or visit our website at https://www.competex.co.uk.

 

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Author: Kavit Sethi
Published on: Last updated: 18th November 2024