June Budget – Capital Gains Tax
In a widely expected change to the present flat rate of 18%, a new 28% rate is to be introduced. This was lower than many feared and will be applied to individuals whose total gains and income are more than the upper limit of the basic rate band of income tax.
The 28% rate will apply to taxable gains, or any part of those gains, that are above that limit. Gains under the limit will still be taxed at 18%. The rate for trustees and personal representatives of deceased persons is increased to 28%.
The rate of CGT for gains qualifying for entrepreneurs’ relief remains at an effective rate of 10%. However the lifetime limit on gains qualifying for entrepreneurs’ relief is to be significantly increased from £2 million to £5 million. The current system of a 4/9th’s reduction in the gain which is then taxed at 18% is abolished in favour of an actual 10% rate so that the annual exemption will now save tax at 10% rather than at 18% as previously.
All of the changes apply to chargeable gains made on or after 23 June 2010.
Finally the annual exempt amount for 2010-11 is unchanged at £10,100.