In a two-step approach to reform of taxation for private equity managers, the Budget set out plans to increase the rate of capital gains tax (CGT) on carried interest returns to 32% from 6 April 2025 with an effective 4% hike from the current 28% rate.

But there will be a more systemic overhaul from the 2026-27 tax year. From 6 April 2026, the carried interest taxation regime will move to the income tax framework, which will see gains charged income tax and national insurance contributions (NICs), albeit at a lower effective rate of income tax of around 34%.