diff --git a/public/images/posts/cgt-autumn-budget-pic/cgt-win-loser.png b/public/images/posts/cgt-autumn-budget-pic/cgt-win-loser.png new file mode 100644 index 000000000..736a76426 Binary files /dev/null and b/public/images/posts/cgt-autumn-budget-pic/cgt-win-loser.png differ diff --git a/src/images/posts/cgt-autumn-budget.jpg b/src/images/posts/cgt-autumn-budget.jpg new file mode 100644 index 000000000..d62d5ced2 Binary files /dev/null and b/src/images/posts/cgt-autumn-budget.jpg differ diff --git a/src/posts/articles/cgt-autumn-budget.md b/src/posts/articles/cgt-autumn-budget.md new file mode 100644 index 000000000..0bbe4efd1 --- /dev/null +++ b/src/posts/articles/cgt-autumn-budget.md @@ -0,0 +1,35 @@ +The Autumn Budget 2024 includes substantial reforms to Capital Gains Tax (CGT), with Chancellor Rachel Reeves announcing rate increases across all tax bands. The changes raise the rates from 10% and 20% to 18% and 24%, respectively. + +When accounting for behavioural responses, we project that these changes will raise £6.4 billion from 2025 to 2029\. In 2025 without behavioural responses, they will affect 1.2% of the population and reduce the Gini index of income inequality by 0.4%. + +## Budgetary impacts + +We project the CGT reforms will raise £6.4 billion from 2025 to 2029\. + +| Fiscal Year | 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | Total | +| :------------ | :------ | :----------------------------------------------------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------------------------- | :---- | +| Revenue (£bn) | 0.0 | [1.0](https://policyengine.org/uk/policy?focus=policyOutput.policyBreakdown&reform=69739®ion=uk&timePeriod=2025&baseline=1) | [1.2](https://policyengine.org/uk/policy?focus=policyOutput.policyBreakdown&reform=69739®ion=uk&timePeriod=2026&baseline=1) | [1.4](https://policyengine.org/uk/policy?focus=policyOutput.policyBreakdown&reform=69739®ion=uk&timePeriod=2027&baseline=1) | [1.4](https://policyengine.org/uk/policy?focus=policyOutput.policyBreakdown&reform=69739®ion=uk&timePeriod=2028&baseline=1) | [1.4](https://policyengine.org/uk/policy?focus=policyOutput.policyBreakdown&reform=69739®ion=uk&timePeriod=2029&baseline=1) | 6.4 | + +These estimates are 29% less than HMT and 26% less than the OBR. These variations may stem from different assumptions about behavioural responses. In our model, we assume individuals will adjust their capital gains realisations with an elasticity of \-0.7 with respect to the marginal tax rate; neither HMT nor OBR specify their assumptions on this front. + +| Source | 2024-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | Total | +| ------------ | ------- | ------- | ------- | ------- | ------- | ------- | ----- | +| PolicyEngine | 0.0 | 1.0 | 1.2 | 1.4 | 1.4 | 1.4 | 6.4 | +| HM Treasury | 0.1 | 1.4 | 1.4 | 1.4 | 2.2 | 2.5 | 9.0 | +| OBR | 0.1 | 1.4 | 1.3 | 1.3 | 2.1 | 2.4 | 8.6 | + +Assuming [no behavioural change](https://policyengine.org/uk/policy?focus=policyOutput.policyBreakdown&reform=69732®ion=uk&timePeriod=2025&baseline=1), we project the change to generate £22.2 billion from 2025 to 2029\. While the OBR also provides estimates it describes as static, those account for changes in realisation behaviour, making them incomparable to our static results. + +## Distributional impact + +The CGT reforms affect 1.2% of the population, with impacts limited to the highest income decile. Within the top 10%, 5% see income losses above 5%, another 5% face losses under 5%, while 90% experience no change. The policy has no impact on income levels across the bottom nine deciles. + +Our [distributional analysis](https://policyengine.org/uk/policy?focus=policyOutput.inequalityImpact&reform=69732®ion=uk&timePeriod=2025&baseline=1) shows no change in poverty measures, while the Gini index falls by 0.4%. Across most of the income distribution (the bottom 90% of households), incomes remain unchanged. + +![](/images/posts/cgt-autumn-budget-pic/cgt-win-loser.png) + +Read more of PolicyEngine’s Autumn Budget 2024 coverage: + +- [Employer National Insurance reforms](https://policyengine.org/uk/research/autumn-budget-24-employer-ni) +- [Private school VAT changes](https://policyengine.org/uk/research/vat-school-comparison) +- [Fuel Duty freeze](https://policyengine.org/uk/research/autumn-budget-24-fuel-duty) diff --git a/src/posts/posts.json b/src/posts/posts.json index 79000f0af..8db463a86 100644 --- a/src/posts/posts.json +++ b/src/posts/posts.json @@ -854,6 +854,15 @@ "filename": "Benefit-uprating-25.md", "image": "benefit-uprating-post-pic.jpg" }, + { + "title": "Capital Gains Tax reforms in the Autumn Budget 2024", + "description": "PolicyEngine estimates that the UK's 2024 Capital Gains Tax reforms will raise £6.4 billion between 2025-2029.", + "date": "2024-11-06 15:00:00", + "tags": ["uk", "tax", "featured"], + "authors": ["vahid-ahmadi"], + "filename": "cgt-autumn-budget.md", + "image": "cgt-autumn-budget.jpg" + }, { "title": "Kamala Harris’s Earned Income Tax Credit Expansion Proposal", "description": "PolicyEngine projects that restoring the American Rescue Plan policy would cost $144 billion (static) or $201 billion (dynamic) over a decade, while lowering poverty by 1.6% in 2025.",