Capital Gains Tax (CGT) rates
The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs’ Relief is 10% with a lifetime limit of £10 million for each individual.
CGT annual exemption
The CGT annual exemption is £10,900 for 2013/14 and will be increased to £11,000 for 2014/15.
CGT – Private Residence Relief
A gain arising on a property which has been an individual’s private residence throughout their period of ownership is exempt from CGT. There are deemed period of occupation rules which may help to provide an exemption from CGT even if the individual was not living in
the property at the time. This may mean the individual is accruing private residence relief on another property at the same time.
The final period exemption applies to a property that has been an individual’s private residence at some time even though they may not be living in the property at the time of disposal.
For disposals on or after 6 April 2014 the final period exemption will be reduced from 36 months to 18 months. There may be exceptions for disabled individuals and long term residents in care homes.
CGT – non-residents and UK residential property
From April 2015 a CGT charge will be introduced on future gains made by non- residents disposing of UK residential property. A consultation on how best to introduce this will be published shortly.
Business roll-over relief
Roll-over relief allows CGT to be deferred on gains made on certain qualifying assets where the proceeds are used to purchase other qualifying assets within a specified period of time. With effect from 20 December 2013 a payment entitlement under the new EU Basic Payment Scheme for farmers will become a qualifying asset.
IHT nil rate band
The IHT nil rate band remains frozen at £325,000 until 5 April 2018.
IHT exemption for emergency service personnel
The Government will consult on extending the existing IHT exemption for members of the armed forces whose death is caused or hastened by injury while on active service to members of the emergency services.
Changes to the trust IHT regime
Certain trusts, known as ‘relevant property trusts’, provide a mechanism to allow assets to be held outside of an individual’s estate for the purpose of calculating a 40% IHT liability on the death of an individual. The downside is that there are three potential points of IHT charge on relevant property trusts:
• a transfer of assets into the trust is a chargeable transfer in both lifetime and on death
• a charge has to be calculated on the value of the assets in the trust on each ten-year anniversary of the creation of the trust
• an exit charge arises when assets are effectively transferred out of the trust.
For information on how the budget affects you, or discussions on capital taxes, call our Tax Team on 0845 177 5500 or contact us online