Capital Gains: Investors’ Relief limit cut among changes revealed
Newsletter issue – December 2024
One of the headline areas of tax reform in the Autumn Budget surrounded Capital Gains Tax. With rates altered by the Chancellor, it was one of the areas which attracted the most focus.
Since Rachel Reeves' speech, the full details of the Budget have been released. As is always the case after a Chancellor's Budget speech, many more details are subsequently published. In this case, more changes around CGT have emerged.
This included rules on Investors' Relief (IR), which has had, up until now, a lifetime limit of £10 million of qualifying gains for an individual. But this has been cut to £1million. The measure was announced to apply immediately (from Budget day on 30 October) although it must be passed by MPs in Parliament first, as part of the Finance Bill 2024-25.
This relief allows for individuals to pay a lower rate of CGT when selling ordinary shares in an unlisted trading company, under certain circumstances or criteria. The cut to the limit is another element of raising revenue, officials stated, alongside the rises to CGT rates. However, less than 50 people will be affected in the 2025 to 2026 tax year, according to Government papers.
The second announcement came in a policy paper on Capital Gains on liquidation of a Limited Liability Partnership. HMRC said this particular move was about "tackling an avoidance scheme", adding it will "increase trust in the tax system".
This will affect members of a Limited Liability Partnership (LLP) who have contributed assets to a Limited Liability Partnership that is then liquidated.
HMRC's policy paper stated: "This measure ensures that where a member of a LLP has contributed assets to the LLP, chargeable gains that accrue up to the contribution are charged to tax when the LLP is liquidated and the assets are disposed of to the member, or a person connected to them. The LLP will be liable in the normal way for gains from that time on their actual disposal of the asset."
Both sets of changes will be included within The 2024-25 Finance Bill, due to come before Parliament soon. This bill's purpose is to enact changes proposed in the Budget.