Capital taxes
Capital gains tax (CGT)
The annual exempt amount remains at £10,100 for 2010/11.
For gains arising up to and including 22 June 2010, the rate of CGT is 18%. For gains arising on or after 23 June 2010 the rate remains at 18% for those whose total taxable income and gains are less than the income tax basic rate upper limit. For gains, including parts of gains, above that limit, the rate is 28%. Gains arising before 23 June 2010 are not taken into account in determining the rate (or rates) at which gains arising on or after 23 June will be charged.
The Chancellor also announced that taxpayers will be able to deduct losses and the annual exempt amount in the way which minimises the tax payable.
Gains deferred under the Enterprise Investment Scheme will be taxable at the CGT rates applicable at the time the deferral ends.
For beneficiaries of non-resident trusts the maximum rate of capital gains tax on ‘stockpiled' gains will be 44.8%. Capital gains are attributed to beneficiaries by matching capital payments with capital gains. Either the gains or the payment may have arisen in an earlier year. It is not yet clear how these attributed gains will be apportioned to pre and post Budget Day periods to determine the rate of tax applicable.
Entrepreneurs' relief
The rate of CGT for gains qualifying for entrepreneurs' relief remains at 10%. However, from 23 June 2010 the lifetime limit will be increased from £2 million to £5 million. The previous 4/9 reduction applied to qualifying gains, to achieve the effective rate of 10%, will cease from 23 June 2010 and a new 10% rate will apply.
Where qualifying gains above the previous £2 million limit are made before 23 June 2010, no additional relief will be allowed but, if further qualifying gains are made after 23 June 2010, relief can be claimed on an additional £3 million (or £4 million where the £1 million limit applied).
Gains qualifying for entrepreneurs' relief are set against any unused basic rate band before non-qualifying gains in determining the rate of CGT to be applied on any other gains arising after 22 June 2010.
Trusts
The rate of CGT for trusts and personal representatives is also increased to 28%, for gains arising on or after 23 June 2010, except where Entrepreneurs' Relief applies.
Inheritance tax (IHT)
The IHT threshold is frozen at £325,000 from 2010/11 to 2014/15.
The rate of IHT remains 20% for lifetime transfers and 40% for death estates (including transfers within seven years before death brought back into the estate for the purpose of calculating the tax due at death).
