Policy paper

Capital Gains Tax: Rates of tax — carried interest

Published 30 October 2024

Who is likely to be affected

Individuals who provide investment management services to investment funds and receive sums of carried interest on which they pay Capital Gains Tax.

General description of the measure

This measure increases the 18% and 28% rates of Capital Gains Tax that apply to carried interest to 32%.

Policy objective

This measure forms part of a wider package of reforms to the tax treatment of carried interest. This package of reforms ensures that the tax treatment of carried interest properly reflects its economic characteristics, putting the UK’s tax regime on a fairer and more stable footing for the long term, while recognising the unique characteristics of the reward and protecting the UK’s position as a world-leading asset management hub.

Background to the measure

This measure was announced at Autumn Budget 2024, following a call for evidence on the tax treatment of carried interest which ran in July and August 2024.

Detailed proposal

Operative date

This measure will apply to carried interest arising to an individual on or after 6 April 2025.

Current law

Current law setting out the rates of Capital Gains Tax for carried interest is at section 1H and 1I of the Taxation of Chargeable Gains Act (TCGA) 1992.

Proposed revisions

Legislation will be introduced to amend sections 1H and 1I of the TCGA 1992 to increase the 18% and 28% rates of Capital Gains Tax that apply to carried interest to a single rate of 32%.

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
—	—	- 5	+ 140	+ 80	+ 85

These figures are set out in table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.

Note that these figures also include the impact of the wider package of policy changes relating to carried interest announced at Autumn Budget 2024 and which will be legislated in a future Finance Bill, to take effect from April 2026.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure will impact approximately 3,100 individuals working in the investment management industry who receive carried interest which is subject to Capital Gains Tax. This measure will increase the Capital Gains Tax liability on those payments. Such individuals will need to ensure they are aware of the new rates of Capital Gains Tax on carried interest.

This measure is not expected to impact on family formation, stability, or breakdown.

This measure is not expected to have any impact on an individual’s experience of dealing with HMRC, as it does not significantly alter how individuals interact with HMRC.

Equalities impacts

It is not expected that there will be adverse effects on any group sharing protected characteristics.

Impact on business including civil society organisations

There is not expected to be any significant impact on businesses or civil society organisations as this measure only affects individuals.

Operational impact (£ million) (HMRC or other)

HMRC will need to make changes to its IT systems to support implementation of this measure. These changes are currently estimated to cost in the region of £4.5 million.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be monitored through information provided on tax returns and through communication with taxpayers and practitioners affected by the measure.

Further advice

If you have any questions about this change, contact the Financial Services Policy Team by email: financialservicesbai@hmrc.gov.uk.