Chancellor Rachel Reeves announced on Wednesday that capital gains tax (CGT) rates for shares and other assets will significantly increase.
Rumours about potential changes to CGT were confirmed in the Autumn Budget.
The lower rate of CGT will rise from 10 per cent to 18 per cent, while the higher rate will rise from 20 per cent to 24 per cent. The rates of CGT on residential property will remain at 18 per cent and 24 per cent.
The tax applies to individuals, company owners, business partners, and self-employed people, among others.
Ms Reeves said the relief for people selling their businesses will remain at 10 per cent this year, rising to 14 per cent in 2025 and 18 per cent in 2026.
So what is capital gains tax?
Here is your comprehensive guide.
What is capital gains tax?
This is a tax on your profit when you sell (or 'dispose of') an asset whose value has increased. The gain you make is taxed, not the total amount you receive. For example, if you bought a painting for £5,000 and sold it later for £25,000, you’ve made a gain of £20,000 (£25,000 minus £5,000).
You can earn an annual allowance without paying CGT, with the tax rate depending on your income tax band.
For the 2024/25 tax year, you get a tax-free £3,000 allowance on capital gains. There were no changes to this in the Budget — down from £6,000 in 2023/2024 and from £12,300 in 2022/2023,
Some assets are exempt from CGT, including your main residence (with certain conditions); personal belongings sold for less than £6,000 (excluding cars); ISAs or PEPs; UK Government gilts; premium bonds; and winnings from betting, lotteries, or pools.
For more information on capital gains tax, visit the Government website.
Visit the Government website for more information on income tax rates and personal allowances:
How do the capital gains tax changes affect savings?
Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until April 5, 2030.
Stocks and savings within this amount are exempt from income and capital gains tax. Many people fail to use their annual ISA allowance. However, those whose gains exceed this amount must pay tax on the additional profit.
