New CGT Term Explained: Adjustment to Capital Gains Tax for Post-Budget Gains

Many UK taxpayers have been perplexed by the unfamiliar line item labeled “Adjustment to capital gains tax for post Budget gains” in their 2024–25 tax returns. Here’s a concise and clear guide to what it means, why it applies, and how it affects you.

Budget Change and CGT Rate Increase on 30 October 2024

In the Autumn Budget on 30 October 2024, the government announced an immediate increase to Capital Gains Tax rates for non-property assets (like shares and bonds). The basic rate rose from 10% to 18%, and the higher rate rose from 20% to 24%. Because the tax year 2024–25 spans both before and after this budget date, gains must be split and taxed accordingly, leading to the need for the “Adjustment to capital gains tax for post Budget gains” calculation.

Why This Adjustment Appears

· In the Autumn Budget on 30 October 2024, the CGT rates for non-property assets (such as shares and bonds) were increased immediately:

o Basic rate rose from 10% to 18%

o Higher rate rose from 20% to 24%

· Since the tax year 2024–25 (6 April 2024 to 5 April 2025) spans both the pre- and post-Budget periods, any gains realized before 30 October 2024 are taxed at the old rates, while gains on or after 30 October 2024 must use the new, higher rates.

· To ensure the correct amount of tax is paid, HMRC and tax software split your gains into two parts and apply the respective rates, creating the “adjustment”figure to reflect the extra tax due on post-Budget gains.

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CGT Rates for 2024–25 Tax Year (Non-Property Assets)

· Basic rate before 30 October 2024: 10%

· Basic rate on or after 30 October 2024: 18%

· Higher rate before 30 October 2024: 20%

· Higher rate on or after 30 October 2024: 24%

How the £3,000 Annual Exempt Amount Applies Across Periods

· You can apply your annual exempt amount (AEA) in whichever way is most beneficial, even when part of your gains fall under the 10% period and part under the 18% period.

· This flexibility is allowed under TCGA 1992, section 1K(5).

· HMRC guidance confirms you may use your annual exempt amount against the gains charged at the highest rates first, which usually reduces your overall tax bill most efficiently.

How It Works — Simple Breakdown

1. Calculate your total taxable gains for the tax year.

2. Apply the £3,000 Annual Exempt Amount (AEA) to your gains. You can allocate this exemption to whichever part of your gains (pre- or post-Budget) is most beneficial, often to the higher-rate portion.

3. Split the remaining gains into two parts:

o Gains up to 29 October 2024 taxed at 10% (basic rate) or 20% (higher rate)

o Gains on or after 30 October 2024taxed at 18% (basic rate) or 24% (higher rate)

4. The tax software then adds an adjustment line which equals the additional tax due by applying the new, higher rates to the post-Budget slice.

Example

If your total taxable gain is £8,000, with half of this year gains happened on or before 30 October 2024 your tax adjustment might look like:

· 500 tax charged at 10% on the pre-Budget basic rate portion (£5,000 gain × 10%).

· After the Budget, the basic rate increased to 18%, so tax on that portion would be £900 (£5,000 × 18%).

· Applying the £3,000 Annual Exempt Amount against the post-Budget gains means only £1,000 is taxable at 18%, while the other £4,000 is taxed at 10%.

· As a result, an Adjustment to Capital Gains Tax for Post-Budget Gains of £80 reflects the extra tax due on the post-Budget gains taxed at 18%.

Seek Professional Advice

If you have capital gains in the 2024–25 tax year, it’s important to understand this “Adjustment to Capital Gains Tax for Post-Budget Gains” to ensure your tax is calculated correctly. Using your annual exempt amount strategically can help minimise your tax liability across the different rate periods. If you’re unsure about how this applies to your situation, consider consulting a tax professional or referring to HMRC’s official guidance to avoid surprises on your tax return.

If you’re unsure whether your tax position is optimised, or if you have questions about your 2024–25 tax return, it’s always best to seek professional advice. Our experienced accountants at Elaga Accountancy can help you navigate these changes and optimise your capital gains tax liability.

Contact us today for more information or to discuss your specific situation.

Contact Elaga Accountancy today — we’ll walk you through the process and handle the rest, so you can file with confidence and focus on what matters most.

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