Capital Gains Tax and the Autumn Budget: what taxpayers should be thinking about now

Chancellor John Healey will deliver his first Budget on Wednesday 28 October, the first under Andy Burnham’s premiership.

The Government has reiterated its commitment not to increase the main rates of income tax, VAT or National Insurance. At the same time, it faces pressure to fund its spending commitments while remaining within its fiscal rules.

Against that backdrop, attention will inevitably turn to other parts of the tax system. Capital Gains Tax (CGT) is likely to be part of that conversation.

There is, however, an important distinction between what might be discussed and what will actually happen. We have been here before, and taxpayers should be wary of making significant decisions purely in response to pre-Budget speculation.

Where are we now?

CGT has already changed considerably over the past two years.

For 2026/27, the main rates are 18% for gains falling within the basic rate band and 24% thereafter. These rates have applied to most assets since the changes announced at the October 2024 Budget, bringing them into line with the rates already applying to residential property.

The annual exempt amount remains just £3,000 for individuals and £1,500 for most trusts, having fallen significantly from £12,300 as recently as 2022/23.

For entrepreneurs, perhaps the most noticeable change has been to Business Asset Disposal Relief (BADR). The rate increased from 10% to 14% in April 2025 and rose again to 18% from 6 April 2026. Investors’ Relief follows the same rate, with both reliefs subject to a £1 million lifetime limit.

The difference is significant. Someone realising a £1 million gain fully qualifying for BADR would have paid £100,000 of CGT at the old 10% rate. At today’s 18% rate, the bill is £180,000.

There have been other important changes too.

Carried interest moved out of the CGT regime from 6 April 2026 and is now taxed within the income tax framework as deemed trading profits, with Class 4 National Insurance also potentially applying. Qualifying carried interest benefits from a 72.5% multiplier leading to a tax rate of c34% (inclusive of a 2% NIC).

Employee Ownership Trusts have also become less generous. For qualifying disposals made on or after 26 November 2025, only 50% of the gain is exempt. The remaining 50% is chargeable under the normal CGT rules, and BADR and Investors’ Relief cannot be claimed where EOT relief applies.

And from 6 April 2026, incorporation relief is no longer something taxpayers can simply assume will apply automatically. A claim now needs to be made through the Self Assessment return.

Alongside these changes, dividend tax rates increased in April 2026 to 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers. The additional dividend rate remains 39.35%.

In other words, the taxation of capital and investment returns has already moved materially over a relatively short period.

Could CGT change again?

Possibly.

The Chancellor has limited room for manoeuvre. The Government has spending priorities to fund, has committed itself to its fiscal rules and has maintained the manifesto commitments around the main rates of income tax, National Insurance and VAT.

That naturally puts greater focus on taxes outside those commitments.

But there is an obvious problem with relying too heavily on CGT to raise revenue: people can change their behaviour.

Unlike PAYE on a salary, a capital gain will often arise because somebody has chosen to sell an asset. Faced with a higher tax rate, they may simply delay selling it, restructure a transaction or, in some cases, reconsider where they live.

That makes forecasting the revenue from CGT increases particularly difficult. Higher rates do not necessarily produce proportionately higher receipts. HMRC’s own ready reckoner (The Direct effects of illustrative changes bulletin) last published in June 2025 and modelling the impact of changes from April 2026 shows that an increase in main CGT rates leads to a significant net loss to the Exchequer in most years.

So far, neither the Prime Minister nor the Chancellor has announced a specific proposal to increase CGT rates.

What might the Chancellor look at?

A number of possibilities are likely to feature in the debate before October.

The most obvious is another increase in the headline CGT rates, potentially moving them closer to income tax rates. That possibility has been debated repeatedly in recent years, although there is currently no announced Government policy to do so.

Private Residence Relief could also attract attention. The exemption for gains on an individual’s main home is a valuable part of the CGT regime, particularly for owners of higher-value properties. Any attempt to restrict it would, however, be politically sensitive and could have significant consequences for the housing market.

Other areas that could conceivably be revisited include the £3,000 annual exempt amount, the £1 million BADR lifetime limit and some of the more specific CGT exemptions and reliefs.

There is also the longstanding question of the CGT uplift on death. At present, assets are generally rebased to market value on death, meaning gains arising during the deceased’s lifetime can effectively disappear for CGT purposes. Any change here would be significant, particularly if considered alongside wider inheritance tax reform.

None of these changes have been announced. At this stage, they should be treated as possibilities rather than predictions.

Don’t assume changes will wait until April

One of the most important lessons from the October 2024 Budget is that CGT changes do not necessarily wait until the beginning of the following tax year.

When the main CGT rates were increased in 2024, the change took effect immediately on Budget Day. Anti-forestalling provisions also accompanied the changes.

Anyone contemplating a transaction therefore needs to be careful about assuming there will automatically be a five-month window between the Budget and 6 April 2027.

But accelerating a transaction purely because CGT might rise carries its own risks.

Selling an asset now crystallises a real tax liability at 18% or 24% to protect against a tax increase that may never happen. For most disposals in 2026/27, that liability will become payable on 31 January 2028. Different reporting and payment rules apply to disposals of UK residential property, where CGT may need to be reported and paid within 60 days.

There can also be practical traps. Investors thinking of selling listed shares to crystallise a gain and then immediately buying them back need to consider the 30-day share identification rules. Simply selling shares and repurchasing the same shares shortly afterwards will not necessarily produce the tax result expected.

What should taxpayers be doing now?

For most people, the answer is not to rush into transactions. It is to understand their position and make use of the rules that we know exist today.

Using the £20,000 ISA allowance remains an obvious starting point. Investments held within an ISA are sheltered from CGT, irrespective of what happens to CGT rates in the future. From April 2027, the amount that most individuals can subscribe to a cash ISA will be limited to £12,000 within the overall £20,000 ISA allowance.

The £3,000 CGT annual exemption is also use-it-or-lose-it, so investors with portfolios should consider whether there is an opportunity to use it as part of their normal investment planning.

Business owners may consider planning options to crystallise a capital gain before a potential rate change, but this is an important decision as there would be a dry tax charge and anti-forestalling measures could mean such planning does not work. Nevertheless, there are options to look at, especially if a business sale is likely in the next 12 months.

Regardless, business owners already considering a sale of the business, or individuals with a significant property or investment disposal on the horizon, it makes sense to model the numbers now. What does the transaction look like at a 24% CGT rate? What happens if that rate increases? Is BADR available? And is there genuine commercial flexibility around timing?

Lastly, anyone contemplating becoming non-UK resident needs to be particularly careful. Moving country is not a short-term tax planning exercise. UK land remains within the scope of UK CGT for non-residents and the temporary non-residence rules can bring certain gains back into charge if an individual subsequently returns to the UK.

Planning, not predicting

There will inevitably be plenty of speculation between now and 28 October.

Some of it may prove correct. Much of it probably will not.

The sensible approach is therefore to distinguish between planning that makes sense anyway and action that only makes sense if a particular Budget rumour turns out to be true.

For people already considering a business sale, investment disposal or other significant transactions, now is a good time to understand the options and the potential tax exposure.

But irreversible decisions based solely on speculation can be expensive.

The aim should not be to predict the Budget. It should be to make sure that, whatever the Chancellor announces on 28 October, you understand what it means for you and are in a position to respond.

Would you like to know more?

If you would like to discuss how the potential changes could affect you, please speak to Malli Kini or your usual contact.