UK Increases Carried Interest Tax Rate to 32%

J.P. Morgan is enhancing its focus on private equity within its wealth management services, with two-thirds of its clients investing in this asset class, according to Ulrich von Auer, Managing Director at J.P. Morgan Private Bank in Germany. The bank aims to cater to affluent families willing to accept the illiquidity associated with private equity investments, which have reportedly grown significantly in assets under management. Meanwhile, the UK Labour government has enacted changes to capital gains tax (CGT), increasing the rate on carried interest from 28% to 32%, impacting around 3,100 individuals and aiming to close a tax loophole that favored private equity managers. The Chancellor, Rachel Reeves, also raised main CGT rates, which has received mixed reactions from the private equity sector, indicating a push for more sustainable investment practices. As the 2024 election nears, the private equity market is poised for robust activity, supported by economic trends and substantial funds ready for investment despite potential political uncertainties. The outcome of the election may have implications for future M&A activity and regulatory scrutiny in various sectors, including technology and energy.