The landscape of CGT has evolved, and planning ahead can help you to minimise your tax burden and protect your wealth.

All statistics in this article are taken from the most recent UK Government Policy Paper ‘Capital Gains Tax — rates of tax’ published on November 6th 2024. [1]

What Changed in 2024?

In October 2024, the UK government introduced significant changes to CGT rates. These changes will affect individuals, trustees, personal representatives, and business owners alike, as the rates for CGT on certain assets have increased. Here’s a summary of the key changes:

Changes to CGT Rates:

• Main CGT Rates for assets other than residential property and carried interest have risen from 10% and 20% to 18% and 24% respectively for disposals made on or after 30 October 2024.
• The rate for trustees and personal representatives has increased from 20% to 24% for disposals made after 30 October 2024.

These changes mean that if you are selling assets such as stocks, bonds, or business assets, you will now be taxed at higher rates than previously.

Residential Property Rates Remain Unchanged

It’s also worth noting that the CGT rates for residential property remain the same, at 18% and 24%. If you are selling a residential property, these unchanged rates will still apply. However, if you’re selling assets that aren’t residential property, you could face higher CGT rates starting from the late part of 2024.

What’s Coming in 2025 and Beyond?

While we are now in 2025, it’s also important to look ahead at further changes that will impact CGT rates starting in April 2025 and April 2026.

Business Asset Disposal Relief and Investors’ Relief:

• The rate for Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) and Investors’ Relief will rise from 10% to 14% on disposals made from 6 April 2025.
• From 6 April 2026, this rate will increase further to 18%.

If you are a business owner or investor, you should be aware that these reliefs, which are crucial for those selling business assets or shares, will see a higher tax rate in the coming years. Planning the timing of any sales could make a significant difference in your tax bill.

Strategies to Minimise or Avoid CGT Liabilities

Although the recent rate changes can seem overwhelming, there are several effective strategies you can use to reduce your CGT liability and maximise your wealth retention.

1. Take Full Advantage of the Annual Exemption

The annual exempt amount allows individuals to make a certain amount of gains each year without incurring CGT. Be sure to make the most of this exemption each tax year. You can also spread out the sale of assets across different years to ensure that you take advantage of the full allowance available to you.

2. Offset Gains with Losses

If you have made losses on investments, you can use these losses to offset any gains. This is a smart way to reduce your taxable gains and, therefore, your CGT liability. This strategy, known as tax-loss harvesting, helps you balance out gains and losses to minimise your overall tax burden.

3. Gift Assets to Family Members or Charities

One of the most tax-efficient ways to reduce your CGT is by gifting assets. Transfers of assets to your spouse or civil partner are generally exempt from CGT, which could help you shift assets to a lower tax bracket. Additionally, donating assets to charity can also allow you to avoid CGT and even provide you with tax relief.

4. Invest Through Tax-Efficient Accounts

Investing through ISAs (Individual Savings Accounts) allows you to grow your investments free of CGT. Any gains made within the ISA are completely exempt from tax, making this one of the best ways to avoid CGT altogether. If you haven’t already maximised your ISA contributions, now is a great time to do so before the end of the tax year.

Similarly, pension contributions can be a valuable tool for minimising CGT. Not only do you get tax relief on contributions, but any growth within your pension fund is free from CGT. This is a long-term strategy that can greatly enhance your retirement prospects while keeping your tax liabilities low.

5. Plan the Timing of Your Sales

If you’re planning to dispose of assets that could be subject to CGT, you can potentially reduce your tax liability by timing your sales. For example, if you’re looking to take advantage of the Business Asset Disposal Relief, consider selling before the rate increases in April 2025. This allows you to lock in the current 10% rate before it rises to 14%.

6. Take Advantage of Business Asset Disposal Relief

For business owners, the Business Asset Disposal Relief remains an essential consideration. With the rate set to rise in April 2025 and 2026, selling before the rate change can help you save on taxes. If you’re planning a sale, it’s worthwhile to consult with a financial adviser to ensure that you are fully prepared for the upcoming changes and can make the most of the available relief.

Proactive Planning for 2025 and Beyond

As CGT rates continue to evolve, staying informed and proactive is key to managing your tax liabilities effectively. By understanding the recent changes to CGT, taking advantage of tax-efficient investment strategies, and planning your sales carefully, you can minimise the impact of these changes on your wealth.

Now is the time to review your asset portfolio and consider any adjustments you might need to make. A tax-efficient approach today will help you secure a stronger financial future.

Get Expert Advice Today

The changes to Capital Gains Tax in 2024 and 2025 are significant, but they don’t have to negatively impact your wealth. Take action now to understand how these changes affect your investments and explore strategies to minimise your tax liabilities. Contact a financial adviser to start planning for the future and ensure you’re making the most of every opportunity.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both.

HM Revenue and Customs practise and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

[1] Gov.uk – Policy paper – Capital Gains Tax — rates of tax https://www.gov.uk/government/publications/changes-to-the-rates-of-capital-gains-tax/1cf25453-5b0c-4e7b-9165-65cf117e0af0