UK-based private equity professionals received a record £5.4bn in carried interest and other profit-related payments during the 2024-25 tax year, a 50% increase on the previous year, as managers moved to crystallise gains ahead of increases to the carried interest tax rate, according to a report by Bloomberg.
Figures from HM Revenue & Customs show that private equity partners generated their largest recorded payout since the tax authority began collecting the data in 2017. The resulting tax receipts reached £1.45bn, surpassing the previous record of £1.34bn recorded in 2021.
The sharp increase came despite a relatively subdued exit environment. The report cites data from Pitchbook as showing that UK private equity sales totalled approximately £42bn during the year, less than half the £91bn recorded in 2023.
The prospect of higher taxes appears to have provided an additional incentive for managers to realise profits before changes to the UK’s treatment of carried interest took effect.
The Labour government increased the capital gains tax rate applying to carried interest to 32% from April 2025, from 28%, with a further increase to 34% taking effect from April 2026.
The changes followed an election campaign pledge to address what Labour had described as a favourable tax treatment for private equity executives.
The composition of private equity exits during the period also highlights the challenges facing the industry.
More than 65% of UK private equity deals were sales to other private equity firms, according to PitchBook data, representing the highest proportion in a decade.
That included several significant transactions. Advent International sold UK logistics business Evri to Apollo Global Management for a reported £2.7bn in July 2024, while footwear brand Kurt Geiger was sold to US-listed retailer Steve Madden for nearly £300m in February 2025.
Public market listings and strategic sales to corporate buyers accounted for a relatively small share of exits, reflecting the difficulty managers have faced in realising investments at their desired valuations since interest rates rose and private market multiples came under pressure.
The reliance on sponsor-to-sponsor transactions has also coincided with increased use of alternative liquidity solutions, including continuation funds, preferred equity and additional borrowing.
