Capital gains tax

Rates and entrepreneurs' relief

See the March 2011 Budget for changes to Entrepreneurs' relief.

The following matters have been announced in respect of capital gains tax. They will apply to individuals, trustees and personal representatives of deceased persons:

• The annual exempt amount for 2010-11 remains at £10,100. The Chancellor stated in his Budget Day speech that the limit will be subject to indexation in future years.
• A new rate of capital gains tax of 28 per cent will be introduced with effect from 23 June 2010. For individuals the capital gains tax rate will remain at 18 per cent where total taxable gains and income are less than the upper limit of the income tax basic rate band. The 28 per cent rate will apply to any excess.
• Capital gains arising between 6 April 2010 and 22 June 2010 will continue to be taxed at 18 per cent.
• For trustees and the personal representatives of deceased persons, the rate of capital gains tax increases from 18 per cent to 28 per cent with effect from 23 June 2010.
• The rate of capital gains tax for gains qualifying for entrepreneurs' relief remains at 10per cent. The lifetime limit on gains qualifying for entrepreneurs' relief is increased from £2 million to £5 million with effect from 23 June 2010.
• If an entrepreneur sold a qualifying business for a gain of between £2 million and £5 million between 6 April 2010 and 22 June 2010, he cannot take advantage of the increase in the lifetime limit post the date of sale to mitigate his capital gains tax liability on the initial gain.
  * It is possible for an entrepreneur to make a qualifying gain of £2 million before 23 June 2010 and a further qualifying gain of £3 million after 22 June 2010 in order to take advantage of the increase in the lifetime limit.
• Investors may have deferred a capital gain in previous years by reinvesting in shares under the enterprise investment scheme. This gain could be deferred until the replacement shares were themselves sold. If the replacement shares are sold after 22 June 2010, the deferred capital gain will be liable to capital gains tax at either 18 per cent or 28 per cent, dependent upon the quantum of the gain.

Private residence relief and adult placement carers

Where individuals set aside part of their house exclusively for use under a local authority adult placement scheme private residence relief (PPR) is available provided the area used is used exclusively for the purposes of their business as a carer.

The measure will have effect for disposals on or after 9 December 2009.