The announcement in the recent Budget saw Capital Gains Tax (CGT) rate increases and new rules for carried interest and Limited Liability Partnerships (LLPs).
These changes could impact investors, fund managers, and business owners.
Why are CGT rates increasing?
The lower CGT rate has jumped from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent.
While the intention is to ensure fairness, could this create new challenges for investors and business owners trying to manage their tax liabilities?
It is worth asking yourself, does this change affect the timing of your asset sales? With higher rates, would it be wise to reassess your investment strategy?
What’s happening with carried interest?
If you are in the world of private equity or venture capital, you have likely heard about carried interest, the share of profits fund managers receive. So, how will the new rules affect you?
From April 2025, carried interest will be taxed at a CGT rate of 32 per cent.
From April 2026, it gets even more interesting (or concerning).
Carried interest will be taxed as income. Could this push some fund managers into the highest income tax brackets?
Here is something to think about, does your current compensation structure still work under these changes?
If not, what steps can you take now to minimise future tax liabilities?
LLPs and asset transfers – What has changed?
Have you relied on the flexibility of Limited Liability Partnerships to transfer assets without tax implications?
If so, the Budget has shaken things up. Any assets contributed to an LLP are now taxable immediately, even before liquidation.
Why this change? It’s aimed at closing tax avoidance loopholes, but what does it mean for legitimate business arrangements? Should you be rethinking how you contribute assets to your LLP? And more importantly, have you reviewed your tax planning to prepare for this?
What should you do next?
Does it feel like these changes are targeting multiple fronts including your investments, your income, and your partnerships?
With so many moving parts, is it time to take a step back and review your overall tax strategy?
Ask yourself:
- Do I need to adjust my investment portfolio to reduce CGT liabilities?
- How will the carried interest changes affect my income and financial plans?
- Are there alternative ways to structure my LLP contributions to manage the new tax rules?
Reacting to these updates might seem daunting, but proactive planning could save you from unexpected liabilities. So, what is your next move?
