Capital Gains Tax, Inheritance Tax & Tax Efficient Investments

How the Annual Statement may impact you in respect of a look at Capital Gains Tax, Inheritance Tax & Tax Efficient Investments.

Our Autumn Statement Summary

In this post about the main provisions of the Chancellor’s most recent Autumn Statement, we take a look at Capital Gains Tax, Inheritance Tax & Tax Efficient Investments. Although there weren’t any significant changes, it remains important to understand these provisions and what they mean for you, particularly in light of the fast-approaching end of the tax year and the rumours of changes that may be announced in the Budget in March.  

Capital Gains Tax (CGT)

Capital gains

Although there were no changes to the regime for CGT, the importance of understanding the tax allowances and rates for CGT is to take advantage of:

 CGT annual exemption

As previously announced, the capital gains tax annual exempt amount will be reduced from £6,000 in 2023/24 to £3,000 in 2024/25.

CGT rates

No changes to the current rates of CGT were announced. This means that the rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains, mainly chargeable gains on residential properties, with the exception of any element that qualifies for Private Residence Relief.

There is still potential to qualify for a 10% rate, regardless of available income tax basic rate band, up to a lifetime limit for each individual. This is where specific types of disposals qualify for:

• Business Asset Disposal Relief (BADR) (formerly known as Entrepreneurs’ Relief) – this is targeted at directors and employees who own at least 5% of the ordinary share capital in the company, provided other criteria are also met. It can also apply to owners of unincorporated businesses.
• Investors’ Relief – the main beneficiaries of this relief are investors in unquoted trading companies who have newly-subscribed shares but are not employees.

Current lifetime limits are £1 million for BADR and £10 million for Investors’ Relief.

CGT 60-day reporting and payment following a property disposal

UK resident individuals who dispose of UK residential property are sometimes required to deliver a CGT return to HMRC and make a payment on account of CGT within 60 days of completion of the property disposal.

Broadly, this only applies where the property disposal gives rise to a CGT liability and as such usually excludes the disposal of a property to which private residence relief applies.

Sale of a business

When considering the sale of a business, no announcements were made in the Autumn Statement to the rules relating to Employee Ownership Trusts, Family Buy-Outs, Substantial Shareholding Exemption, Investment Companies, Merger and Demerger Rules.

Inheritance Tax (IHT)

No announcements were made in relation to IHT, notwithstanding the rumours circulating ahead of the Autumn Statement.

The IHT nil-rate bands will therefore stay fixed at their current levels until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000 and the residence nil-rate band taper will continue to start at £2 million.

Tax Efficient Investments

Individual Savings Accounts (“ISAs”)

The government is freezing the limits on ISAs at £20,000, Junior ISAs at £9,000, Lifetime ISAs at £4,000 excluding the government bonus and Child Trust Funds at £9,000 for 2024/25.

However, a number of changes will be made to allow multiple subscriptions to ISAs of the same type every year and to allow partial transfers of ISA funds in-year between providers from April 2024.

Enveloped Dwellings (ATED)

ATED rates increase by CPI

The annual chargeable amounts for ATED will be uplifted by the September CPI figure of 6.7% for the 2024/25 ATED charging period.  This will take the charge to £4,400 a year for a property valued between £500,001 to £1m, and at the top end of the scale to £287,500 a year for a property valued over £20m (up from £267,450, being an increase of over £18,000).

You can find further insights about the Autumn Statement here: Autumn Statement Summary. In our next post, we will look at the impact of the Autumn Statement on entrepreneurs and businesses but in the meantime, if you have any questions concerning any of the issues raised in this post, and how they may affect you, please get in touch.