Carried interest payouts rise 52% to £5.4bn as private equity tax bill hits £1.5bn
David Portman, 3 September 2026
David Portman, 3 September 2026
The value of carried interest payouts received by top executives at private equity firms and hedge funds rose 52% in the last year to £5.4 billion, up from £3.5 billion the previous year, according to our research*
Top executives at private equity firms and hedge funds paid £1.5 billion in tax on carried interest gains in the last year and £5.7 billion in tax over the last five years.
Carried interest is an award paid by private equity firms to their top fund managers, consisting of a share of the profits generated when the firm exits an investment.
Under current UK tax rules, carried interest payouts are generally treated as capital gains for tax purposes.
Our research shows whilst men working at private equity and hedge funds made £5 billion in carried interest gains, women made £366 million in gains.
A total of 3,890 people working at hedge funds and private equity firms realised gains through carried interest in the last year, averaging approximately £1.4 million each.
David Portman, Tax Partner, says: "Carried interest payouts made by private equity firms jumped very sharply in the last year. That increase in gains is usefully timed as they have just escaped an increase in tax on carried interest from 28% to an effective rate of 32% from the following year. Some private equity funds and hedge funds could have crystallised gains early so as to book profits before the increase in tax. For the sale of a private equity-owned business, that is harder to do. The amount of tax paid by private equity firms and hedge funds on carried interest highlights the importance of this industry to HM Treasury."
The HMRC data also showed that people who declared less than £10,000 in gains accounted for just 0.3% of all Capital Gains Tax (CGT) paid in the year. Meanwhile, those declaring more than £1 million in gains accounted for 68% of all CGT paid.
David Portman says: "The Government should raise the CGT tax-free allowance to at least £10,000, given how little tax is raised from smaller gains and the additional compliance burden and associated costs associated with calculating and paying Capital Gains Tax.
A higher allowance would encourage more people to invest in capital markets where they have already exhausted their Stocks and Shares ISA allowance, for example. That is something the UK economy desperately needs."
*Source: Based on HMRC's Capital Gains Tax statistics, released on 27 August 2026.
