Capital gains tax: how it works, benefits and pitfalls of another hike
Source: The Guardian ·
Increasing the rate of CGT is one of the tax levers available to chancellor as he considers revenue-raising optionsCapital gains tax (CGT) has been widely cited as a possible revenue-raiser as the chancellor, John Healey, prepares to deliver a tough budget next month. How does it work, and what are the pros and cons of raising it further? Continue reading...
From the source
Capital gains tax (CGT) has been widely cited as a possible revenue-raiser as the chancellor, John Healey, prepares to deliver a tough budget next month. How does it work, and what are the pros and cons of raising it further? When you sell an asset – whether it’s a share, a business, or a buy-to-let property – you pay capital gains on the uplift in its value since you bought it . It’s not quite that simple: you can reduce your CGT bill by deducting losses made on other investments, and the costs of investing in improving a property. But essentially, it’s a tax on the profits realised when an asset is sold. The rate of CGT is now 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. There’s an even higher rate, of 32%, for City fund managers who take their earnings as a share of profits in a controversial system called “carried interest”. All those rates have gone up significantly since Labour came to power in 2024, as Rachel Reeves, the previous chancellor, chose to tax…