Capital gains tax from property and carried interest doubles

Whilst many are expecting increases to capital gains tax (CGT) rates to be announced in the October 2024 Budget, initial data from HMRC suggests that the reduction in the rate of 28% to 24% from 6 April 2024 for residential property transactions may have helped to increase receipts. Despite the tax rate being lowered, CGT receipts in the period from 1 April 2024 to 31 August 2024 were £854m, up from £778m in the same period the year before.

That may in part be a product of the property market warming up generally in light of the prospect of interest rate cuts and it could also point to some taking steps to sell up ahead of a potential hike in CGT in the Budget. It also forms part of a wider trend in recent years in the number of individuals paying tax at the top rate of CGT of 28% that previously applied to residential property and carried interest gains.

The gains from sales of residential property in the UK have seen significant changes over the past five years, driven by various economic factors and tax policies. According to data obtained from HMRC by RSM UK in a freedom of information request, between 2016/17 to 2022/23, the number of taxpayers liable for CGT at the higher rate of 28% rose from 50,000 to 120,000. The total CGT paid at the higher rate surged from £1.58bn in 2016/17 to over double that amount to £3.36bn in 2021/22. With the decline in property transactions generally, it has since fallen to £3.04bn in 2022/23.