Although nothing specific has been released, justifiable suspicions remain over whether the Labour government will further increase capital gains tax rates at some point. Although adjustments were made to the rates of CGT in the 2025 Spring Statement, Rachel Reeves has hinted at further tax increases in the autumn of 2025; additional cash still needs to be raised and this money has to come from somewhere. A CGT rate increase, perceived to be targeting more wealthy individuals, is an obvious source.
The most feared revision to CGT would be to align the CGT rates with income tax rates, which would of course significantly increase CGT rates. Here is a summary of what the current rates of CGT are:
Current CGT rules
Even if there are no immediate changes to CGT rates, it’s important to note that the annual exemption was reduced from £12,300 to £6,000 for the 2023/24 tax year and further to £3,000 for 2024/25. This tapering of the annual exemption is very unlikely to be reversed, and the exemption could in fact be abolished.
Current CGT rates are:
– 18% (for basic rate taxpayers) or 24% (for higher and additional rate taxpayers) for all assets.
Strategies to mitigate potential CGT increases
Consider realising capital gains now – Current CGT rates are unlikely to decrease and , there may be a strong incentive for taxpayers who want certainty over their future tax liabilities to dispose of assets sooner rather than later. This could lock in what is likely a good immediate tax planning opportunity before any potential rate increases.
Plan around Budget announcements – Keep in mind that Rachel Reeves has hinted at tax increases and increases to CGT could potentially be announced in the 2025 Autumn Budget.
Income level planning – When making disposal decisions, take a long-range view of what your income is likely to be over the forthcoming tax year:
– If you expect a lower income (and lower tax rates) in future tax years, you might delay asset disposals;
– If you anticipate higher future income pushing you into higher thresholds, consider realising gains in the current tax year to lock in the lower rates now;
– Remember to maximise the current £3,000 annual allowance where possible.
Utilise capital losses – Current rules allow for capital losses made during a tax year to be offset against capital gains of the same tax year. Unused losses can be carried forward to future tax years, provided a claim is submitted to HMRC within four years of the end of the tax year in which the loss occurred. This can significantly reduce your CGT liability.
Employ tax shelter strategies – Consider using “Bed and ISA” strategies to transfer assets held outside a tax wrapper into an ISA. This triggers a capital gain now (potentially at lower rates) while sheltering future growth from tax. Remember to utilise the annual ISA allowance of £20,000 for 2024/25.
Spousal transfers – If you’re married or in a civil partnership, assets can be transferred between spouses with no immediate tax implications. This allows you to:
– Utilise both partners’ £3,000 annual exemption;
– Transfer assets to a spouse who is in a lower income tax bracket (who would therefore pay CGT at a lower rate).
Benefit from Business Asset Disposal Relief – Formerly known as Entrepreneurs’ Relief, Business Asset Disposal Relief (BADR) is a tax relief for eligible business owners. It allows them to pay CGT at a reduced rate on qualifying disposals, subject to a lifetime limit of £1 million. This relief was targeted in the 2024 Autumn Budget and from 6 April 2025, the level of CGT payable on the first £1m gain has increased to 14% (from 10%). This rate will increase again to 18% from 6 April 2026.
If you qualify for BADR and are considering a business exit, you might want to evaluate selling your shares before the rate increases.
Our perspective on CGT liabilities
Whatever your views on capital gains tax and the potential for tax rates to increase, tax is of course only applied on gains above the annual exemption. Given the ongoing cost of living pressures affecting many people in the UK, having capital gains to realise could be viewed as a fortunate position to be in.
If you would like to discuss how to approach capital gains tax planning and the disposal of assets that may be subject to capital gains tax, contact us for expert advice based on your individual circumstances.