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Capital gains tax increase on investments announced in 2024 Autumn Budget
Sales of assets such as shares, but not property, will incur more tax
Chancellor Rachel Reeves has announced hikes in the rates of capital gains tax (CGT) on assets, excluding residential property, in today's Autumn Budget.
People who sell investments or possessions that have increased substantially in value will pay more in CGT.
While there were previously four rates of CGT, there are now just two – 18% or 24%, depending on your income and the size of your gain.
Here, we explain how CGT is changing, and other investment stories from the Autumn Budget.
Capital gains tax rate on shares and other assets increased
Changes to the rate of CGT will take effect immediately, so any sales of assets from today will incur the new rate.
The rate on capital gains tax has been increased for basic, higher and additional-rate taxpayers. There is no specific CGT rate for additional-rate taxpayers, who instead pay the higher rate.
If you are a basic-rate taxpayer but you make a gain that pushes your overall taxable income into the higher rate, you'll pay the higher rate of CGT on the portion of that gain over the income tax threshold.
How the capital gains tax rates are changing
| Previous basic rate | New basic rate | Previous higher rate | New higher rate | |
|---|---|---|---|---|
| Residential property | 18% | 18% | 24% | 24% |
| Other assets | 10% | 18% | 20% | 24% |
Previous budgets saw the tax-free allowances for CGT slashed from £12,300 down to £3,000, but there have been no further changes to the allowances in this budget – meaning you still don't need to pay tax until your gains exceed £3,000.
- Find out more: capital gains tax rates
What does the capital gains tax rate increase mean for me?
Most people will not have to pay capital gains tax as it doesn't apply to the sale of your main home or car.
HMRC’s most recent statistics showed there were 369,000 taxpayers liable to pay CGT in the 2022-23 tax year, and over half of payments came from 6,000 taxpayers who made gains of £2m or more.
You'll need to pay capital gains tax if you sell assets and make a profit of over £3,000 on your original investment – not once the sale itself is worth £3,000.
Here's an example using a fictional person selling a large holding of shares:
Dennis has a taxable income (what’s left after deducting the personal allowance of £12,570) of £52,430. After selling a large holding of shares, he made a gain of £12,000, which is added to his taxable income to make £64,430 – so he’ll need to pay the higher rate of 24%.
After deducting his CGT allowance of £3,000 from his gain, Denis will owe CGT at 24% on £9,000, which amounts to £2,160.
At the previous rate of 20%, he would have paid £1,800 – a difference of £360.
Inheritance tax relief on AIM shares to be cut in 2026
The rate of business property relief has been reduced from 100% to 50% for shares designated as 'not listed' on a recognised stock market, such as the Alternative Investments Market (AIM).
Such shares, once they've been held for two years, used to be entirely exempt from inheritance tax (and would not count towards the value of your estate).
But the change, taking effect in April 2026, will mean they will only be 50% exempt from inheritance tax. The government predicts this will affect around 0.3% of estates each year.
The AIM is an index of riskier and less developed companies than those on the more commonly used FTSE index, and offers a way to invest in small, unlisted businesses. Many venture capital trusts (VCTs) invest in companies on the AIM, and offer other tax incentives – such as income tax relief – which are unchanged.
The Financial Conduct Authority recommends only ‘sophisticated investors’ – with more than £250,000 to invest and annual incomes higher than £100,000 – should invest in VCTs because of the much higher likelihood of sustaining big losses.
- Find out more: How to find a financial adviser
What other Budget changes affect investors?
- Annual Isa allowances frozen until 2030 – Annual subscription limits will remain at £20,000 for stocks and shares and cash Isas, £4,000 for lifetime Isas and £9,000 for junior Isas and Child Trust Funds until 5 April 2030.
- British Isa officially scrapped – Following rumours that the government would not continue with plans for a new British Isa (officially, the UK Isa), the additional tax-free allowance was ruled out in the Budget's small print.
- Capital gains tax also increased on carried interest for fund managers – Fund managers will pay more tax on 'carried interest' they make on their funds' returns. It's not clear if this will have any impact on fund investors.
How to make use of your tax-free allowances
People who are impacted by CGT can deduct costs from the sale of an asset – for example, stamp duty when you purchased the shares and any stockbrokers' fees.
You can also deduct losses you make in each tax year from your gains, and as a result be charged less CGT.
You can invest up to £20,000 each tax year in a stocks and shares Isa, junior Isa, lifetime Isa or pension, and you won’t have to pay capital gains tax – or dividend or income tax – on any returns.
If you hold investments outside of an Isa, the 'bed and Isa' process allows you to sell an asset in a general investment account and repurchase the same asset straight away in an Isa, junior Isa or SIPP.
You’ll incur CGT on the sale of the investment if it gives you a gain above £3,000, but any future returns once the investments are inside the Isa will be tax-free.
The current tax year ends on 5 April 2025, and you receive a new £20,000 allowance from 6 April 2025. You can’t roll over any unused allowance from one year to the next, and losses on assets held in an Isa can't be set against capital gains elsewhere.
You can read our verdict on the best stocks and shares Isas in 2024, based on feedback from 1,952 customers, plus our analysis of fees.
