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Budget report 22 June 2010

Capital Taxes

Capital gains tax	2010/11	2009/10
Capital gains tax rate: Standard rate	18%	18%
Higher rate*	28%	N/A
Entrepreneurs’ relief:
Effective rate	10%	10%
Lifetime limit
6 April – 22 June 2010	£2,000,000	£1,000,000
23 June 2010 onwards	£5,000,000	£1,000,000
Annual exemption
Individual	£10,100	£10,100
Settlement	£5,050	£5,050
* For higher and additional rate tax payers from 23 June 2010.

 

Inheritance tax	2010/11	2009/10
Nil rate band	£325,000	£325,000
Chargeable rate on lifetime transfers	20%	20%
Rate on transfers on or within 7 years of death	40%	40%

 

Capital gains tax: rates and entrepreneurs’ relief

The following matters have been announced in respect of capital gains tax. They will apply to individuals, trustees and personal representatives of deceased persons:

• The annual exempt limit for 2010-11 remains at £10,100. The Chancellor stated in his Budget Day speech that the limit will be subject to indexation in future years.
• A new rate of capital gains tax of 28% will be introduced with effect from 23 June 2010. For individuals the capital gains tax rate will remain at 18% where total taxable gains and income are less than the upper limit of the income tax basic rate band. The 28% rate will apply to any excess.
• Capital gains arising between 6 April 2010 and 22 June 2010 will continue to be taxed at 18%.
• For trustees and the personal representatives of deceased persons, the rate of capital gains tax increases from 18% to 28% with effect from 23 June 2010.
• The rate of capital gains tax for gains qualifying for entrepreneurs’ relief remains at 10%. The lifetime limit on gains qualifying for entrepreneurs’ relief is increased from £2 million to £5 million with effect from 23 June 2010.
• If an entrepreneur sold a qualifying business for a gain of between £2 million and £5 million between 6 April 2010 and 22 June 2010, he cannot take advantage of the increase in the lifetime limit post the date of sale to mitigate his capital gains tax liability on the initial gain.
• It is possible for an entrepreneur to make a qualifying gain of £2 million before 23 June 2010 and a further qualifying gain of £3 million after 22 June 2010 in order to take advantage of the increase in the lifetime limit.
• Investors may have deferred a capital gain in previous years by reinvesting in shares under the enterprise investment scheme. This gain could be deferred until the replacement shares were themselves sold. If the replacement shares are sold after 22 June 2010, the deferred capital gain will be liable to capital gains tax at either 18% or 28%, dependent upon the quantum of the gain.

Capital gains tax – private residence relief and adult placement carers

Where individuals set aside part of their house exclusively for use under a local authority adult placement scheme private residence relief (PPR) is available provided the area used is used exclusively for the purposes of their business as a carer. The measure will have effect for disposals on or after 9 December 2009.

 

For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.

© 2012 McAllen and Co | Capital taxes

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