UK households issued warning over Capital Gains Tax 'allowance' change

UK households issued warning over Capital Gains Tax 'allowance' change
-Credit: (Image: Reach Publishing Services Limited)


A £3,000 warning has been issued over Capital Gains Tax. Capital Gains Tax (CGT) is one of the least common taxes on income, and individuals have an "annual exempt amount" – for 2024/25 it’s £3,000 - so above this, you pay CGT on all gains.

In the wake of the Labour Party Budget, Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The change is a blow for investors. This could have been worse, with suggestions of a doubling of the rate, but it’s scant consolation for anyone hit with a bigger tax bill.

“This doesn’t just affect those who are hit with a far bigger bill, it also makes investment less attractive for newcomers who don’t want to have to get to grips with a new tax risk. Already far fewer people in the UK invest than elsewhere in the world, and this could compound the problem.”

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Ms Coles said the change comes on top of a decision made by the last government to cut the capital gains that people can make before they pay tax from £12,300 a year in 2022-23 to just £3,000 in the current year. Ms Coles said: “Many people on average incomes, who’ve invested carefully throughout their lives, can face a tax bill when they rebalance their portfolio or sell up to cover their costs later in life.

“The annual allowance of £3,000 doesn’t stretch particularly far when you’re selling an investment you’ve held for 30 years or more, so investors should consider how to protect themselves.” She added: “It’s disappointing the government has decided to hike this tax without considering counteracting it with changes to taxes on investors more broadly.”

Kundan Bhaduri, Property Developer and Portfolio Landlord at The Kushman Group, told Newspage: "By increasing the lower rate to 18 percent and the higher rate to 24 percent, the government is sending a clear message: investment is not welcome.

“While they claim this change will generate £2.5 billion, the reality is that such punitive measures risk driving away the very investors who fuel growth, innovation, and job creation. This policy shift may create a chilling effect that discourages investment and hampers progress.”