Budget 2024: Capital Gains Tax hike confirmed by Rachel Reeves - who has to pay it explained

A major hike to Capital Gains Tax (CGT) has been confirmed today in the Autumn .

Labour Chancellor confirmed the changes in her speech in the House of Commons this afternoon. Capital Gains Tax is a tax charged if you sell, give away, exchange, or dispose of an asset - this could be things such as a second home, shares in companies, art, or jewellery - and make a profit or "gain".

It is not the amount of money you receive for the asset, but the gain you make, that is taxed. One example used on GOV.co.uk is if a person buys a painting for £5,000 and then sells it later at £25,000. This means that the person made a gain of £20,000 and will pay the tax on that gain, which is charged at 10% for basic rate taxpayers.

The amount of Capital Gains you pay depends on your taxable income and the type of thing you dispose of - but you pay the tax on all profits above £3,000. If you are a basic rate taxpayer, you pay a rate of 10% if you sell the asset, and you pay 18% when you sell a residential property other than your main home. The rate is either 20% or 24% for higher or additional rate taxpayers.

Rachel Reeves says the lower rate of 10% will rise to 18%, and the higher rate will rise from 20% to 24%. Even with the rise, Reeve says this will still be the lowest rate for any European G7 country.

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If you are a UK resident, you may be liable to pay Capital Gains Tax on disposals of assets located anywhere in the , not just in the UK. You don’t have to pay the tax on certain assets and any gains you make on things including ISAs, UK government gilts and Premium Bonds , plus - if you’re lucky enough - betting, lottery or pool winnings. You also don’t pay it when you inherit an asset, but you may have to if you sell.

Critics have long called for Capital Gains rates to be brought in line with income tax rates. The Institute for Public Policy Research (IPPR) said that by doing this, the government could raise around £ 14billion a year. The Think Tank argued that Capital Gains are paid only by around 0.65% of the adult population, which is just 350,000 people. It also added that most revenue from the tax only comes from the 0.02% of the population who make gains of over £1 million.

Commenting on today's announcement, Brian Byrnes, Head of Personal Finance at Moneybox said the changes to Capital Gains tax did come to fruition after weeks of speculation. He said: "The challenge with the Capital Gains Tax annual allowance is ensuring it remains fair. It has been reduced considerably in recent years, meaning more people than perhaps intended now fall into this bucket.

"Thankfully most savers and investors still have the option of saving in tax wrappers such as ISAs an incredible tool for wealth creation and the envy of investors around the world as well as Pensions, which become even more attractive after today’s announcement.

“With the government’s goal to foster a savings and investment culture in the UK and boost wealth creation, it's important that we aren’t disincentivising those early into their wealth-building journey, and are instead encouraging savers to invest and grow their money.”

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