Capital gains tax (CGT)
The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The government is to reduce the higher rate of CGT from 28% to 20% and the basic rate from 18% to 10%. The trust CGT rate will also reduce from 28% to 20%. The 28% and 18% rates will continue to apply for carried interest and for chargeable gains on residential property that do not qualify for private residence relief. In addition, the 28% rate still applies for ATED related chargeable gains accruing to any person (principally companies). These changes will take effect for disposals made on or after 6 April 2016.
The rate for disposals qualifying for Entrepreneurs’ Relief (ER) remains at 10% with a lifetime limit of £10 million for each individual.
Example 2016/17
Annie, a higher rate taxpayer, has the following chargeable gains after the annual exemption:
- Gains eligible for ER £100,000
- A residential property gain £30,000
- Other gains £10,000
The ER gain is taxable at 10%. The residential property gain will be taxed at 28% and other gains at 20%.