Capital Gains Tax

Rates and Entrepreneurs’ Relief

New rates of capital gains tax (CGT) are introduced with effect for gains arising on or after 23 June 2010. For individuals, a new higher rate of 28% applies where total taxable income and gains are more than the upper limit of the basic rate income tax band (currently £37,400). The higher rate applies to any gains or parts of gains which exceed the limit. Where total taxable income and gains do not exceed the limit, gains remain taxable at 18%.

For trustees and personal representatives, the higher 28% rate applies to all taxable gains arising on or after 23 June 2010.

Gains arising in 2010/11 but before 23 June 2010 are liable to CGT at 18% and are not taken into account in determining the rates which apply to gains made on or after that date.

Changes are also made to entrepreneurs’ relief to ensure that gains on qualifying disposals on or after 23 June 2010 are taxed at a rate of 10%. The lifetime limit for entrepreneurs’ relief is increased to £5m with effect for gains made on or after the same date. In determining the rate at which an individual pays CGT on other gains, gains qualifying for entrepreneurs’ relief are set against any unused basic rate band before non-qualifying gains.

An individual can deduct allowable losses and the annual exempt amount from gains in the way which minimises the tax due.

Principal Private Residence Relief and Adult Placement Carers

Where a person cares for an adult under a local authority placement scheme, their contract with the local authority may require them to set aside one or more rooms exclusively for the use of the adult in care. In such a case, TCGA 1992, s 224 can prevent the CGT exemption on the individual’s principal private residence relief being available on that part of the property.

The legislation will remove this possible restriction so the fact that part of the home is occupied by the adult in care will not prevent CGT relief being available on that part.

This change will have effect for disposals on or after 9 December 2009.