Budget 2024: Increased CGT rates and further whittling of BADR
Andy Wood • October 31, 2024
Budget 2024: Increased CGT rates and further whittling of BADR
Introduction
The focus of pre-Budget speculation (and there was an awful lot!) seemed to be on changes to CGT.
Mrs Reeves did not disappoint, and the CGT changes can be distilled into three parts:
- Changes to main rates;
- Changes to Business Asset Disposal Relief (“BADR”); and
- Changes to the lesser spotted Investors Relief.
Changes to the Capital Gains Tax (CGT) rates
Prior to the Budget, the main rates of Capital Gains Tax (CGT) were 10% (where a gain falls in the basic rate band) and 20% to the extent a gain falls in the higher or additional rate bands.
However, these are changed from 18% to 24% respectively. These match the rates already in place for residential property sales.
As I predicted elsewhere (click here), 24% seemed the obvious rate based on data released by the Government earlier in the year.
Importantly, the change too effect for disposals made on or after 30 October 2024.
Business Assets Disposal Relief – further whittling
Again, I have said, that, prior to the Budget, BADR was a shadow of its former self…
A pale shadow…
A husk..
But, despite that, as I pointed out here,
the data for clobbering this relief further was compelling.
And that is why Mrs Reeves has taken out her fiscal scalpel again.
The rate of CGT for BADR will increase as follows:
- to 14% for disposals made on or after 6 April 2025, and
- to 18% for disposals made on or after 6 April 2026.
From 2026, the maximum benefit of BADR will be 6% on £1m. Although I wouldn’t turn down £60k, it is hardly worth writing home when it comes to such a relief. It is almost as Reeves simply wanted to keep the relief merely as a totem.
Capital Gains Tax — Investors’ Relief
As I say, the lesser spotted relief known as Investor’s Relief.
I say lesser spotted because I can’t ever remember having a serious discussion about this relief with a client. Maybe that says more about me than the relief.
Anyway, Reeves is also neutering this relief by:
Increasing the 10% rate to 14% and 18% in the same stages as BADR; and
reducing the lifetime limit from £10 million to £1 million for Investors’ Relief qualifying disposals made on or after 30 October 2024.
Conclusion
The changes to CGT were largely predictable. I had never subscribed to the talk of equalisation as it made no sense when looking at the data.
I have experienced little practical knowledge of investors relief, but it seems to me that, if one is whittling away the reliefs for involved business owners, it should also be whittled away for mere investors.
For over two centuries, the UK’s non-domiciled tax regime and its remittance basis has been a cornerstone of tax planning for wealthy expats and international families. It was introduced, along with income tax, by Willian Pitt the Younger at the very end of the 18th century. It was part of the fiscal firepower necessary to battle Napoleon Bonaparte. And, like income tax, it had pretty much been a constant feature of the UK’s system ever since. But in March 2024, the then Chancellor, Jeremy Hunt, rang the death knell for the remittance basis, with Labour’s Rachel Reeves – who would succeed Hunt a few months later - declaring she would have abolished it anyway. The end is therefore very much nigh for the UK’s non-dom tax regime. More specifically, the end is 6 April 2025. However, out with the old and in with the new’ goes the saying. As such, the ‘what comes next’ will reshape the tax landscape for non-doms, expats, and international investors with a UK footprint (or those considering creating one). What is Domicile (and Non-Domicile)? Domicile is not a straightforward concept like tax residence. The latter is largely about physical presence (or otherwise) in a particular. Instead, as well as physical presence, it also requires an understanding of your future intentions. Is a place somewhere that you intend to live permanently or indefinitely. There are two main types of domicile that I will discuss here: • Domicile of origin: This is inherited at birth, usually from your father (if you think that is misogynistic then I don’t make the rules, OK?). You do not lose your domicile of origin. However, think of it as the foundations of a building. You can a domicile of choice on top it. • Domicile of choice: You build a new domicile of choice by achieving two things. Firstly, by physically residing in place and, secondly, by forming the intention to stay in that same place permanently or indefinitely. Both must be present.
So you’ve left the UK for pastures new. The sun is shining. You're making more money. You’re enjoying a great quality of life in a new country. In fact, you’re totally de-mob happy. Even better, as a non-UK resident, UK taxes are a dim and distant unpleasant memory, right. Right? Wrong. I don’t necessarily see my role in life as chief balloon popper. However, there are some Uk tax things you should bear in mind before declaring yourself a tax exile. Am I really non-UK Resident (“NR”)? Up until 2013, the UK didn’t really have a statutory definition of residence for tax purposes. Yes, that’s as crazy as it sounds. Fortunately, the Statutory Residence Test (“SRT”) was introduced from 2013. The idea is that it provides a degree of objectivity through a series of tests. Although a statutory test, other than in straightforward cases, it can still remain complex.
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