The 2024 Autumn Budget brought significant changes to the UK’s tax landscape, as we watched Labour raise capital gains tax (and much else besides) in order to fill a ‘£40bn fiscal black hole’.
The chancellor, Rachel Reeves, declared that these rises would “wipe the slate clean”, and provide a platform for growth. However, there is now speculation that further tax rises may be announced by at her spring Statement, due on 26th March.
The reasons for this aren’t hard to find. Firstly, it’s expected that due to the poor economic climate, the chancellor’s £9.9bn of ‘fiscal headroom’ has been all but wiped out. In addition, Sir Keir Starmer has refused to explicitly rule out tax rises – a prudent course of action, perhaps, but one guaranteed to provide grist to the rumour mill.
So is the gossip justified? Could further tax rises be in the offing?
What happened in the autumn Budget, and will Labour raise capital gains tax (CGT) again?
Under the guise of a more simplified system, Labour used the Budget to align tax rates on residential property gains with most other assets, including investment portfolio gains. CGT therefore increased to 18% for basic rate taxpayers (from 10%) and 24% for higher and additional rate taxpayers (from 20%).
These are significant rises, but that 24% rate is significantly below the income tax rate for higher earners of 40% or even 45% – and falls short of comparable taxes charged in most other G7 nations. And again, Starmer has not ruled out further rises.
It’s also worth noting that the annual CGT exemption (the amount of gain you can generate in a tax year which is tax exempt) continues to fall, from £12,300 in the 2022/23 tax year, to £6,000 in 2023/24 – and now a meagre £3,000 currently.
So overall, an increased CGT rate here is pretty unlikely, although not impossible.
Buy-to-let properties: less attractive following capital gains tax rises?
Who will be impacted?
Landlords of residential properties were relieved in April 2024 when the higher rate of CGT was reduced from 28% to 24%, and breathed a sigh of relief when no changes were announced in October the same year. However, what’s been given with one hand has been taken with another, with legislation such as the Renters’ Rights Bill, expected to become law in summer 2025, and rises to Stamp Duty due in April 2025. Both will put greater financial pressure on landlords and make buy to let property a less attractive asset.
Business owners also fell victim to the Budget, due to increased Business Asset Disposal Relief (CGT on profit from business sales and associated assets) from 10 to 14% – which is due to kick in on 6th April 2025. That rate will rise again to 18% from April 2026. For business sales generating £2m of profit, this will eventually represent an increase of £80,000 extra in CGT.
Although further changes are unlikely, if you’re thinking of exiting or selling a business any time soon, it’s crucial to act now – structures like Employee Ownership Schemes could potentially deliver huge tax savings, but time is fast running out to take advantage.
What else might happen on the tax front?
- Labour may decide to restrict cash ISA limits
- A lifetime cap on ISA contributions has also been mooted
- Tax threshold freezes could be extended (as previously reported, Labour do not consider this a breach of their election manifesto promises)
Of course, until the 26th, all this is supposition. It should be noted as well that this is not a budget. In a departure from recent tradition, Labour have indicated they prefer to have one Budget a year, in late autumn. However, that doesn’t prevent Rachel Reeves making fiscal changes, such as around tax, in the spring Statement.
That means that the Statement will, in theory, focus primarily on whether the country is on track for growth. But if growth is disappointing, fresh revenue will have to be found through taxation or cuts to public spending.
How can I stay informed about this issue?
Whether we see Labour raise capital gains tax or not, we’ll be posting our usual detailed breakdown and analysis shortly after the Statement’s publication – to receive this directly to your inbox, join our mailing list.
We’ll also be running a Q&A session with our expert advisers on 31st March, once the dust has settled. It’s a great opportunity to get straight answers to the issues you care about – you can sign up for that here.
You can also book a complimentary consultation with us below if you’d like to discuss your own personal position. These consultations are a good way to find out whether you need to take action to keep your family and your business on the right fiscal path.
Whatever you decide – it’s a good time to stay on top of events, if you want to stay on top of your finances.
Any money invested carries an element of risk and you are not guaranteed to get back the money you invested. This article does not constitute advice and you should consult your financial adviser prior to any action.
*Figures correct as of March 2025
