“This reduces net gains and lowers the effective return on investments, which could influence the appeal of capital growth-focused investments.
“For both basic and higher-rate taxpayers, these CGT rate increases can slow the rate of wealth accumulation, as investors will be left with less of their profits to reinvest.”
Employers' NI painful for smaller businesses
One major pain point in the Budget was the increase in employers’ national insurance contributions.
Daniel Wiltshire, actuary and IFA at Wiltshire Wealth, said: “Relative to the frankly hysterical headlines of the past few weeks - this Budget was a big nothing burger.
“Okay, there's the increase in CGT - but the rate was at historic lows and there's merit in the argument that the rate of tax on capital versus labour has become too wide.
“The increase in employers NI will be more painful, particularly for small businesses, but there's a sense among those I've spoken to that things could have been far worse.”
Scott Gallacher, chartered financial planner and director at Rowley Turton, added: “Investors will be disappointed to see CGT rates rising to property levels.”
CGT rates for Business Asset Disposal Relief and Investors’ Relief will also rise gradually to 14 per cent from 6 April 2025 and match the main lower rate of 18 per cent from 6 April 2026, to allow business owners time to adjust to the changes.
Gallacher said entrepreneurs would be very upset to see business asset disposal relief rising to 18 per cent over the next couple of years, adding this could see an early exit of a number of smaller business owners.
The government is also reforming agricultural property relief and business property relief from April 2026.
In addition to existing nil-rate bands and exemptions, the 100 per cent rate of relief will continue for the first £1mn of combined agricultural and business assets and will be 50 per cent thereafter.
The government will also reduce the rate of business property relief to 50 per cent in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as AIM. This will affect around 0.3 per cent of estates each year.
Gallacher said the government’s plans could have profound implications on long-term business continuity and the preservation of generational wealth.
He added: “The decision to limit AGR and BPR may be understandable, but clarity is needed on whether this change will apply to all private businesses.
“If family-owned businesses lose their current exemptions from Inheritance Tax, we risk a return to the dark days of ‘death duties,’ where the necessity of paying the taxman often forced family businesses to break up or be sold.”
