The UK Autumn Statement 2024 introduced significant updates to Capital Gains Tax (CGT), Inheritance Tax (IHT), and specific reliefs such as Business Property Relief (BPR), Agricultural Property Relief (APR), and Investors' Relief (IR). Additionally, changes to the taxation of carried interest were announced. These adjustments impact business owners, investors, and estate planners, requiring careful consideration to mitigate tax liabilities.
Capital Gains Tax (CGT) Changes
From October 30, 2024, CGT rates increased significantly:
- Basic-rate taxpayers: Increased from 10% to 18%
- Higher-rate taxpayers: Increased from 20% to 24%
- Rates for residential property remain unchanged at 18% (basic rate) and 28% (higher rate)
Business Asset Disposal Relief (BADR)
The CGT rate under BADR rises incrementally:
- 10% for disposals until April 5, 2025
- 14% for disposals between April 6, 2025, and April 5, 2026
- 18% for disposals from April 6, 2026
- The £1 million lifetime limit on qualifying gains remains unchanged
Investors' Relief (IR)
- IR follows the same rate progression as BADR
- The lifetime gains limit was reduced from £10 million to £1 million for disposals after October 30, 2024
Carried Interest
- The CGT rate on carried interest increases to 32% starting April 6, 2025, for one tax year, pending a government consultation
- From April 6, 2026, carried interest will be subject to a new framework under Income Tax rules, reflecting broader changes to its taxation
Implications: Business owners and investors must carefully time disposals to take advantage of the current lower rates before increases fully take effect in April 2026. Professional advice is critical to ensure compliance with anti-forestalling rules and to optimize relief eligibility.
Inheritance Tax (IHT) Changes
Threshold Freezes
The government confirmed freezes to key IHT thresholds:
- The nil-rate band remains at £325,000 until April 2028
- The residence nil-rate band is also frozen at £175,000
These freezes, combined with rising asset values, will push more estates into the 40% IHT charge, heightening the importance of proactive planning.
Business Property Relief (BPR) and Agricultural Property Relief (APR)
BPR and APR provide up to 100% IHT relief for qualifying business and agricultural assets:
- BPR: Applies to trading businesses, unquoted shares, and certain business property
- APR: Covers agricultural land and associated assets actively used for farming
While no immediate changes were made, the government has flagged these reliefs for future review, potentially narrowing eligibility. Risks include:
- Liquidity challenges: Beneficiaries inheriting illiquid assets (e.g., family businesses or farmland) may face significant IHT liabilities if BPR or APR is restricted. This could force asset sales, disrupting business continuity
- Compliance hurdles: Tightened criteria could exclude businesses deemed passive or investment-focused from BPR eligibility
Key Considerations for Business Owners
Estate and Succession Planning
- Regularly review wills and asset structures to ensure compliance with BPR and APR criteria
- Explore life insurance policies to cover potential IHT liabilities for heirs
- Diversify estate assets to include liquid holdings for easier tax settlement
Trusts and Tax Planning
- Trust structures remain a viable tool but are subject to new anti-avoidance rules, including higher periodic and exit charges
- Seek professional advice to navigate these changes and avoid unanticipated tax burdens
Timing of Asset Disposals
- Investors and entrepreneurs should consider accelerating disposals before BADR and IR rates rise further in April 2026
Prepare for Future Reforms
- With BPR and APR under review, business owners should monitor consultations closely and adjust planning strategies accordingly
Next Steps
The Autumn Statement 2024 represents a significant shift in UK tax policy, with higher CGT rates, stricter inheritance tax implications, and potential reforms to key reliefs. Proactive tax planning is essential for safeguarding family wealth and ensuring smooth business transitions across generations. Engaging with tax professionals can help individuals and businesses adapt to this evolving landscape.