Budget 2024 Update: Changes to Capital Gains Tax for business asset disposal relief
The new Labour government has introduced changes to the capital gains tax (CGT) rate under business asset disposal relief, as anticipated.
Currently set at 10%, the tax rate for the sale of qualifying business assets will rise to 14% from 6 April 2025 and further increase to 18% from 6 April 2026.
Adding to the shift, the previous government had already removed the relief for furnished holiday let properties from 6 April 2025.
If you’re considering selling or transferring business assets, especially to the next generation, acting quickly may be key. Completing a sale or transfer before 5 April 2025 will help you lock in the current lower rate of 10%.
Inheritance Tax changes for business assets and farms
Changes are on the horizon for inheritance tax (IHT) on business assets and farms. From 6 April 2027, the current nil rate—thanks to Business Property and Agricultural Reliefs—will be capped at £1 million. Any value above this cap will face an IHT rate of 20%.
While lobbying from the farming industry may still influence these changes, it’s wise to start planning now. Strategies like transferring assets to the next generation—either directly or via trusts—and surviving the transfer by seven years can help mitigate the impact.
Inheritance Tax Changes for Pensions: What to know
The autumn budget introduced a significant update: from 6 April 2027, pension death benefits are set to attract inheritance tax (IHT). While this change is still under technical consultation, it marks a shift in the way pensions will be treated for estate planning.
Pensions remain tax-efficient, offering relief on contributions, tax-free growth, and income on investments. However, the prospect of a 40% IHT rate on death (subject to other reliefs and allowances) is a disappointment for those aiming to pass wealth down as tax-efficiently as possible.
Though this change isn’t immediate, now is the time to review your strategy. Options include:
Taking withdrawals that fall within your personal allowances or basic rate band (attracting just 20% income tax).
Making IHT-efficient gifts annually within your allowances.
Exploring regular gifts from excess income or charitable giving.
Please Contact Us or more details and tailored advice on navigating all these changes.