With the October budget approaching, many are speculating about potential changes to Capital Gains Tax (CGT), which could have a significant impact on business owners, entrepreneurs, and investors alike. One of the most talked-about possibilities is the alignment of CGT rates with income tax rates – a move reminiscent of the regime under Gordon Brown when he served as chancellor. Given Rachel Reeves’ admiration for Gordon Brown’s approach, we might also see a return to taper relief, which could benefit long-term investments.
At A&C Chartered Accountants, we’re keeping a close eye on the possibility of the reintroduction of Business Asset Taper Relief. This could reduce the effective CGT rate to as low as 10% after 10 years of ownership, encouraging long-term investment and entrepreneurship. However, it’s crucial to remember that any relief could come with stricter conditions, especially if the government tightens eligibility criteria further. Many business owners are hoping that Business Asset Disposal Relief (BADR) – or something similar – is retained, to continue incentivising entrepreneurship and growth.
In addition to these potential changes, there may be further restrictions on Private Residence Relief or adjustments to Hold Over Relief for transfers into and out of trusts. Another controversial change to watch out for is the possible removal of the CGT-free uplift to probate value on death, as previously suggested by the now-defunct Office of Tax Simplification (OTS). This change could mean beneficiaries inherit the deceased’s original CGT base cost, rather than the current probate value – potentially leading to larger tax liabilities upon the sale of inherited assets.
As we await the budget announcement, our team at A&C Chartered Accountants will continue to monitor the situation closely, ensuring we provide up-to-date advice to help you navigate any changes. If you’re concerned about how these potential CGT reforms could affect you or your business, get in touch with us to discuss tailored strategies to mitigate your capital gains tax liabilities.