UK Carried Interest Now Taxed as Trading Profits from April 2026

From 6 April 2026, the revised UK tax regime for carried interest treats that reward as trading profits inside the Income Tax framework, rather than as a Capital Gains Tax charge on most amounts. HMRC’s policy paper and Agent Update issue 145 confirm that individuals receiving carried interest are treated as carrying on a trade, with the carried interest (less permitted deductions) taxed as profits of that trade — subject to Income Tax and, where applicable, Class 4 National Insurance contributions.

For 2025 to 2026, carried interest other than income-based carried interest was still declared as a capital gain on the SA108 section of the Self Assessment return, after the CGT rate on carried interest rose to 32% from 6 April 2025. From 6 April 2026 the new trading-profits rules apply. HMRC says it will publish further guidance on how to declare carried interest as trading profits for 2026 to 2027 later this year — so keep working papers ready even while return-box detail is still catching up.

Who is in scope and how ‘qualifying’ amounts work

The revised regime applies where an individual performs investment management services directly or indirectly in respect of an investment scheme and carried interest arises under those arrangements. UK tax residents are in scope, and HMRC’s published measure also covers carried interest relating to investment management services performed in the UK.

Where carried interest is ‘qualifying’, the amount treated as trading profits is 72.5% of the qualifying profits after permitted deductions. Whether carried interest is qualifying depends on the average holding period of the relevant investment scheme under the legislation. Non-qualifying carried interest is taxed as trading profit without that multiplier. Always read the Finance Act / draft legislation definitions with your adviser — fund waterfall language in LPAs is not a substitute for the statutory tests.

Practical steps for 2026/27

Map every carried interest entitlement expected in 2026/27, including timing of crystallisation and which schemes drive average holding period. Affected individuals should review Self Assessment payments on account — Agent Update 145 notes that payments on account may need to change once carried interest sits in Income Tax and Class 4 NICs rather than CGT.

Ask the management company or fund administrator what reporting pack they will issue for the new regime (gross carried interest, permitted deductions, qualifying vs non-qualifying split). Keep those schedules with your digital tax records so your ICAEW/ACCA adviser can complete the return when HMRC’s 2026/27 declaration guidance lands.

Do not assume 2025/26 SA108 treatment continues. Income-based carried interest already had different rules historically; confirm with your adviser which amounts fall under the new chapter and which transitional points still apply.

How FinnAccountings helps with review-ready packs

Clean income schedules and supporting fund reports make Self Assessment packs easier to review when rules change mid-career. FinnAccountings helps Ireland and UK professionals organise bookkeeping and tax prep drafts with Chartered Accountant insight before you or your qualified adviser files. Start a free trial for review-ready drafts — we prepare packs; we do not submit Self Assessment returns or carried-interest elections to HMRC on your behalf.

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Related reading

See our Finance Bill 2026–27 Legislation Day briefing for other draft measures still under technical consultation, and use the free tax calculator only for high-level Income Tax and National Insurance planning — it does not model carried interest multipliers.

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