Capital Taxes
Capital Gains Tax rates
The Capital Gains Tax (CGT) rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter.
Higher rates apply for certain gains, mainly chargeable gains on residential properties, with the exception of any element that qualifies for Private Residence Relief. These rates are changed from 18% and 28% in 2023/24 to 18% and 24% in 2024/25.
There is still potential to qualify for a 10% rate on gains up to £1 million under Business Asset Disposal Relief and £10 million under Investors’ Relief.
CGT annual exemption
The government has announced that the CGT annual exempt amount will be reduced from £6,000 to £3,000 from 6 April 2024.
Inheritance Tax nil rate bands
Despite much speculation before the Budget, Inheritance Tax (IHT) has not been abolished. The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2028. An additional nil rate band, called the ‘residence nil rate band’ is also frozen at the current £175,000 level until 5 April 2028.
Changes to Agricultural Property Relief and Woodlands Relief
To ensure compatibility with EU law, action was taken many years ago to expand the scope of Agricultural Property Relief (APR) and Woodlands Relief to property located in the European Economic Area. Following Brexit, this measure reverses those changes and also removes APR from property in the Channel Islands and Isle of Man. Broadly, the changes take effect from 6 April 2024.
Environmental land management and ecosystem service markets
The government is undertaking significant reform of agricultural policy and spending in England.
At Budget 2023, the government published a consultation exploring elements of the tax treatment of environmental land management and ecosystem service markets. Following consideration of the responses, the government has decided:
- to extend the existing scope of APR from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies and
- not to restrict APR to tenancies of at least eight years.