Capital Gains Tax
The rate of CGT for disposals from 23 June 2010 onwards is determined by adding a taxpayer's chargeable gains to taxable income. If the gains then fall within the basic rate income tax band they are charged at 18%. If the higher rate threshold for income tax is exceeded, they are charged at 28%. These rates were not changed in the Budget, so they will apply for 2011/12. Mr Osborne has indicated that they are likely to remain at this level for several years.
The annual exempt amount for CGT will increase to £10,600 (2010/11: £10,100). In future it is intended to be subject to automatic indexation in line with the Consumer Prices Index.
Trustees
Trustees continue to be liable to CGT at 28% after deducting half the normal annual exemption (£5,300 in 2011/12). The annual exemption is shared between trusts set up by the same settlor since June 1978, subject to a minimum of £1,060.
Entrepreneurs' Relief (ER)
Entrepreneurs' Relief allows certain disposals of businesses and business assets to be charged at a lower CGT rate of 10%. There is a lifetime limit of gains which can qualify. This was increased from £2m to £5m in Mr Osborne's first Budget for disposals from 23 June 2010 onwards, and will increase to £10m for disposals from 6 April 2011. A large gain would otherwise be taxed at 28%, so this represents a very substantial saving.
