Spring Budget 2024 – Capital Gains Tax Rate Reduction
Changes were made to Capital Gains Tax (CGT) allowances and tax rates in the recent Spring Budget that will be relevant to anyone that owns residential property in addition to their own home.
Annual Exemption
Each individual has a CGT annual exemption, being an amount of capital gain that you can make without paying any additional tax. This is being reduced for 2024/25 to £3,000 (currently £6,000). This will affect anyone selling capital assets, such as property or shares who will pay more tax as a result.
As there are still a few weeks before the start of the new tax year, if you are currently planning to sell any of your capital assets (and are able to do so before 6th April) then it may be worth giving some thought to the timing of the sale.
Please get in touch and we’ll discuss the best way for you to proceed, depending on your overall tax situation.
Rates
The main rate of CGT remains at 10% if your gains fall into your unused basic rate band, or if you’re disposing of a business that qualifies for Business Asset Disposal Relief. It then increases to 20% in most other cases, with the exception of residential property sales.
If you sell your own private residence then no CGT will be due, however if you sell a residential property that is not your own private residence then increased CGT rates apply.
From 6th April 2024, the residential property CGT rate will remain at 18% for gains falling into your unused basic rate band but will reduce to 24% (from 28%) for any residential property gains that fall outside of an individual’s basic rate tax band.
Why change the rates?
The Government are hoping that this reduction will encourage more activity in the property market, benefiting those looking to move home or get onto the property ladder.
Remember…
Where CGT applies to a property disposal there can be tax payment and reporting requirements that need to be dealt with within 60 days of the completion date.
It makes sense to get advice in plenty of time if you’re considering a property disposal, so please do get in touch if this applies to you, or if it’s something that you may do in future. It never hurts to know where you’ll stand if you decide to go ahead later!
You can see our Spring Budget Summary here.
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