The 18% and 28% Capital Gains Tax (CGT) rates currently applied to carried interest gains remain unchanged for the current tax year. This charge applies to individuals who provide investment management services to funds and receive carried interest on which they are liable to pay CGT.
However, as announced in the recent Budget, these CGT rates will increase to a single, unified rate of 32% starting on 6 April 2025. Additionally, from April 2026, carried interest will be subject to a broader set of policy changes, with further details to be announced at a later date. These changes are part of a wider reform package targeting the tax treatment of carried interest.
The new Labour Government has committed to reforming this area of taxation. They believe that the current tax regime does not appropriately reflect the economic characteristics of carried interest and the level of risk assumed by fund managers.
According to HMRC, around 3,100 individuals in the investment management sector who receive carried interest and are subject to CGT will be affected. Those impacted will need to ensure they are aware of the new CGT rates on carried interest going forward.