Capital Gains Tax: Investors’ Relief — reduction in the lifetime limit
Published 30 October 2024
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Who is likely to be affected
Individuals who dispose of shares in unlisted trading companies and who pay Capital Gains Tax (CGT).
General description of the measure
Investors’ Relief (IR) provides for a lower rate of CGT to be paid on the disposal of ordinary shares in an unlisted trading company where certain criteria are met, subject to a lifetime limit of £10 million of qualifying gains for an individual.
This measure reduces the lifetime limit from £10 million to £1 million for IR qualifying disposals made on or after 30 October 2024.
There are special provisions for share reorganisations that took place before 30 October 2024 where the shareholder seeks to apply a retrospective tax charge after that date.
Policy objective
This measure forms part of a package of changes to CGT that aims to raise revenue, while ensuring that the UK tax system remains internationally competitive.
Background to the measure
This measure was announced at Autumn Budget 2024.
The CGT rate that applies to IR is increasing from 10% to 14% for disposals made on or after 6 April 2025, and is increasing from 14% to 18% for disposals made on or after 6 April 2026. Information about changes to CGT rates is covered in the tax information and impact note ‘Capital Gains Tax: rates of tax’.
Detailed proposal
Operative date
This measure will have effect for IR qualifying disposals made on or after 30 October 2024.
Current law
Current law for IR is at sections 169VA to 169VY of, and Schedule 7ZB to, the Taxation of Chargeable Gains Act (TCGA) 1992. Section 169VK provides that IR is available subject to a lifetime limit of £10 million per individual.
Proposed revisions
Legislation will be introduced in Finance Bill 2024-25 reducing the IR lifetime limit to £1 million from 30 October 2024. The rules provide that the lifetime limit must take into account the value of relief claimed in respect of qualifying gains in the past.
Rules will be introduced that apply to forestalling arrangements where there has been a reorganisation of a company’s shares before 30 October 2024. Following a reorganisation a shareholder can make an election under section 169VT of TCGA 1992 to trigger a gain at the time of the reorganisation in order to claim IR. Where a shareholder continues to meet the conditions for claiming IR on 30 October 2024 and makes the election after that date then the share disposal will be treated as taking place at the time the election is made for the purposes of the IR lifetime limit. This means that gains will be subject to the new lifetime limit of £1 million.
Summary of impacts
Exchequer impact (£ million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| Negligible | Negligible | Negligible | Negligible | Negligible | Negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This proposal is expected to impact investors who dispose of shares in unlisted trading companies, with gains above the new £1 million lifetime limit and below the previous £10 million lifetime limit. Fewer than 50 individuals are expected to be affected in the 2025 to 2026 tax year.
Reducing the lifetime limit for IR will marginally reduce the cost of the relief, with individuals making qualifying investments still able to access a lower rate of CGT on part of their gains than they would if they had invested in non-qualifying investments.
The measure is not expected to impact on family formation, stability or breakdown.
Customer experience is expected to stay broadly the same because this measure does not bring new taxpayers into the tax system and does not significantly change processes for existing taxpayers.
Equalities impacts
Reducing the lifetime limit will affect a small proportion of taxpayers who pay CGT. IR claimants will likely be represented in each of the groups sharing protected characteristics, however HMRC do not hold data on the protected characteristics of those affected by this measure and cannot determine the equality impacts.
HMRC will provide assisted digital support where this is needed and will also make alternative arrangements for digitally excluded customers.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses or civil society organisations. It only affects individuals and trustees who pay CGT in their personal capacity and personal representatives who pay CGT in that capacity on behalf of an individual or estate.
Operational impact (£ million) (HMRC or other)
HMRC will need to make changes to its IT systems to implement this change at a cost in the region of £400,000.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, contact the Capital Gains Tax policy team by email: cgtbudget@hmrc.gov.uk.