The first new Labour Government Autumn Budget will take place on Wednesday 30 October 2024. New Chancellor Rachel Reeves needs to raise revenues and it is expected that she will deliver a Budget with significant tax changes and announcements.

Whilst the Labour Party made no specific mention of Capital Gains Tax (CGT), their manifesto pledged to increase investment and history shows that CGT has been a key lever in promoting investment and growth. There is no doubt that CGT is on the radar of the new government as an option to raise more tax revenue in future.

The market is already seeing investors selling assets such as shares and property amid fears that the new government may increase CGT. Although investments held in pensions and ISA tax wrappers will not be affected by changes in CGT.

During the election campaign, Sir Keir Starmer ruled out the introduction of paying CGT on the disposal of your main home, but he has never ruled out the prospect of increases to CGT, creating much commentary and speculation.

There has been speculation about aligning CGT with income tax. The highest rate of CGT is currently 24% with the highest rate of income tax is 45%. This could translate to a significant increase in the capital gains tax rate, with a potential increase from 24% to 45% on property sales or transfers, and from 20% to 45% on other assets such as shares.

Business Asset Disposal Relief (BADR) which reduces the effective CGT rate to 10% (on the first £1m of gain) could also be a target in the Budget. The scope of changes and the dilution of benefits from when it was entrepreneur’s relief means that it may be targeted again by abolishing the relief.

It is predicted by The Office for Budget Responsibility that CGT will raise £15.2bn in 2024/25. However, the government’s own figures have shown that increasing CGT too much can reduce the amount it generates because investors hold onto assets such as their business, shares or second properties to avoid being hit with a large CGT bill.

If CGT rates are increased, it is possible that the government will implement the change immediately from 30 October 2024, to prevent business owners disposing of their holdings before the 2025/26 tax year.

We are already being asked by clients whether they should dispose of assets now prior to any potential change. This will depend on the assets you own, and how your dispose of those assets.

If you have transactions already in progress, then it is certainly worth considering trying to complete these prior to the 30^th October to avoid any increase should it happen.

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