Q: I’m an investment manager and part of my compensation comes from carried interest. I’ve heard about changes announced in the Autumn Budget 2024. What do these changes mean for me, and how will they affect my tax position?
A: There were indeed changes announced in the Budget relating to Capital Gains Tax (CGT) on carried interest.
For those reading this not familiar with carried interest, this tax break enables private equity fund managers to pay a reduced rate of tax on their earnings.
As a result of the Chancellor’s Autumn Budget, the CGT rate on carried interest is rising to a flat 32%, effective for any carried interest payments arising on or after April 6, 2025.
The existing rules meant carried interest was taxed at 18% for basic-rate taxpayers and 28% for higher- and additional-rate taxpayers. Those rates are being replaced with a single rate of 32%, meaning most individuals in your position will see an increase in their CGT liability on carried interest.
So, depending on the amount of carried interest you receive, you’ll need to factor in the increased rate when calculating your post-tax income from April 2025 onwards. If carried interest is a significant part of your compensation, you may want to review your financial plans to ensure you’re prepared for this change.
If you’d like to discuss the finer details of how this will specifically impact your tax position or explore planning strategies, please get in touch with our team.
