The UK’s Capital Gains Tax (CGT) rates are set for a significant increase following Rachel Reeves’ budget.
Under the new rates, individuals will face an 18% charge on assets that yield a profit, up from 10%, while higher-rate taxpayers will see CGT climb from 20% to 24%.
The change was confirmed on Wednesday (October 30) during the Autumn Budget and will impact a range of assets including second homes, shares, art and jewellery when sold or disposed of for a profit.
CGT is calculated based on the gain or profit from the sale of an asset rather than the sale price itself.
The tax is payable on gains above £3,000 for most assets, though certain items such as UK government bonds, ISAs and Premium Bonds are exempt.
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This applies not only to assets held in the UK but also to those worldwide if the individual is a UK resident.
The move has drawn mixed reactions from financial experts and politicians.
Brian Byrnes, the Head of Personal Finance at Moneybox, said: “The challenge with the Capital Gains Tax annual allowance is ensuring it remains fair.
“It has been reduced considerably in recent years, meaning more people than perhaps intended now fall into this bucket.”
He added that tax-advantaged accounts like ISAs and pensions “remain attractive options” for long-term savings despite the CGT increase.
Paul Robbins, the Associate Director of Tax at Croner-i, also highlighted the adjustments to Business Asset Disposal Relief (BADR), saying: “The £1 million BADR lifetime allowance will be maintained, but the reduced rate of tax will increase to 14% in 2025-26 and 18% in 2026-27.”
This CGT hike is expected to generate substantial revenue for the government.
Analysts from the Institute for Public Policy Research (IPPR) previously estimated that aligning CGT rates more closely with income tax could raise around £14 billion annually.
The tax currently affects a small fraction of the population, with only 0.65% of UK adults – about 350,000 individuals – paying CGT and 0.02% contributing most of the revenue by making gains over £1 million.
However, Rishi Sunak strongly criticised the increase, calling it part of a broader trend of rising taxes across various sectors.
He said: “National insurance, up. Capital gains tax, up. Inheritance tax, up. Energy taxes, up.”
He also argued these changes would disproportionately affect working people and the elderly, describing the impact as a “squeeze on Britain’s poorest pensioners.”
For those impacted, a CGT return must be submitted and tax paid on the gain generally within 30 days of disposal.
The government has urged taxpayers to consult the official HM Revenue and Customs (HMRC) guidance to confirm their liability and determine applicable exemptions.
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