Capital gains tax: rates and entrepreneurs' relief
The measure
Legislation will be introduced to introduce a new 28% rate of capital gains tax (CGT) which will apply to certain taxpayers. In addition, the lifetime limit on gains qualifying for entrepreneurs' relief will increase to £5 million.
Who will be affected?
Entrepreneurs' relief results in qualifying gains up to the lifetime limit being taxed at a rate of 10%.
For gains not covered by entrepreneurs' relief, individuals will continue to pay CGT at 18% where their total taxable income and gains are below the upper limit of the income tax basic rate band (£37,400 for 2010/11). Gains will be calculated as before, net of available capital losses and the annual exemption. The new 28% rate applies to gains above that limit. Trustees and personal representatives of deceased persons will pay CGT at a flat rate of 28% as will all individuals who pay the remittance basis charge, regardless of the level of their taxable income or gains.
When?
The new measures will apply to disposals on and after 23 June 2010.
Whilst a raise in the rate of CGT for higher rate taxpayers was expected, it has not been aligned with the rate of income tax as first anticipated. However, a further increase has not been ruled out for 2011/12. The increase in the lifetime limit on gains qualifying for entrepreneurs' relief from £2 million to £5 million will no doubt come as welcome news for many taxpayers.
