Spring Budget 2024: Capital Gains Tax Changes

Reduced Tax-Free Allowance:

The bad news? There is already a significant reduction in the annual Capital Gains Tax (CGT) allowance planned. This allowance lets you sell assets for a profit up to a certain level without paying any CGT. In the current tax year (2023/24), this allowance is £6,000. However, it will be cut in half to just £3,000 for the upcoming tax year (2024/25). It is a sound reflection of our current times to note that in previous years, this allowance was £12,300.

Unchanged Rates for Most Assets:

On a more encouraging note, the actual tax rates for Capital Gains Tax on all assets other than residential property remain unchanged. This means that gains falling within a person’s available basic rate a  will suffer 10% rate of tax on most capital gains, while gains exceeding the available basic rate of tax will be taxed at 20%.

Residential Property Sales Get a Break:

The good news? There's a specific change for those selling residential properties such as second homes or rental properties. Previously, these sales faced a higher capital gains tax rate of 28% for profits exceeding the basic tax band. This top rate will be reduced to a more favourable 24% for sales happening on or after April 6, 2024. There is no corresponding reduction for residential property gains which fall within the basic rate of tax, those will still suffer an 18% rate.

Potential Tax Increase and Reporting:

The huge reduction in the tax-free allowance might mean you end up paying more CGT. Additionally, with a lower threshold, more people may need to file a self-assessment tax return to report any gains exceeding the allowance. This emphasises the importance of good record-keeping, especially for tracking down the purchase costs of assets you've owned for a long time. This can be particularly tricky for smaller shareholdings.



Reporting Requirements:

Remember, anyone with gains exceeding the annual exempt amount (£3,000 for 2024/25) must report them to HMRC. However, if your gains are below this amount, you only need to provide details in your tax return if the total proceeds from selling assets in a year exceed £50,000.