As widely predicted, the Chancellor increased the rate of capital gains tax in his June Budget. As from 23 June 2010 a new 28% rate has been introduced.
Individuals
For individuals, the 18% CGT rate remains where total income and capital gains in the current tax year (after taking into account all allowable deductions, capital losses, personal allowances and CGT annual exempt amount) are below £37,400 (the upper limit of the income tax basic rate band).
The new 28% rate will apply to gains, or parts of gains, in excess of this limit.
Any gains in the 2010/2011 tax year arising before 23 June 2010 will still be liable to CGT at 18%. Further, they will not be taken into account in determining the rate(s) at which individual’s gains arising on or after 23 June 2010 will be charged.
If you’ve made capital gains prior to 23 June 2010, and will have capital gains in the current tax year but after 23 June 2010, consider setting your annual exempt amount (currently £10,100 for individuals) against the later gains as they are potentially liable to CGT at the new 28% rate.
Trustees and Personal Representatives
For gains arising on or after 23 June 2010 the new 28% rate will apply for trustees and personal representatives of deceased persons where the gains exceed the annual exempt amount, currently £5,050. This is unless the trustees’ gains qualify for Entrepreneurs’ Relief.
Entrepreneurs’ Relief
Qualifying gains on disposals of entrepreneurial businesses by individuals and certain trustees continue to be subject to a 10% rate of tax.
Further, from 23 June 2010 the amount of gains that can qualify for Entrepreneurs’ Relief has increased from £2 million to £5 million. This was an unexpected, but welcome, increase in the relief’s limit.
For further details about how to make capital gains tax savings please get in touch with your usual contact in the Private Client Team.
