Capital taxes

Capital gains tax (CGT)

The annual exempt amount is £10,100 for individuals (£5,050 for most trustees) for 2010/11.

The rate of CGT remains at 18% with Entrepreneurs' relief potentially reducing the effective rate of tax on qualifying gains to 10%.

Entrepreneurs' relief

With effect from 6 April 2010, the Chancellor announced an increase in the lifetime limit for Entrepreneurs' relief to £2 million.

The new limit will apply only to disposals on or after 6 April 2010. Where individuals or trustees made qualifying gains above the previous £1 million limit before 6 April 2010, no additional relief will be allowed for the excess above the old limit. If they make further qualifying gains after 5 April 2010, they will be able to claim relief on up to a further £1 million of those additional gains, giving relief on cumulative qualifying gains up to the new limit of £2 million.

Foreign tax credit

Where credit for foreign tax may be claimed against a capital gain, HMRC has often restricted the credit allowable if the gain taxed in the UK is less than the amount taxed abroad, or where the gains arise over different periods. This applies particularly where the UK gain is calculated only from March 1982.

HMRC has recently changed its interpretation and will not now restrict the foreign tax credit in this way. The practice can be related back to any previous year that is still in date. Due to the general reduction in time limits for claims to four years, claims for 2004/05 and 2005/06 will be subject to an extended time limit of 30 June 2010.

Inheritance tax (IHT)

The IHT threshold (nil-rate band) has been frozen at £325,000 for 2010/11 to 2014/15. The transferability of the allowance gives an effective tax-free maximum threshold of £650,000 for married couples and civil partners.

The rate of IHT remains at 20% for chargeable lifetime transfers and at 40% for transfers chargeable on death.