Capital gains tax

Capital gains tax rate

As published in the Pre-Budget Report, capital gains above the annual exempt amount will be taxed at a rate of 18% in 2008/09.

Entrepreneurs’ relief

The Chancellor confirmed the introduction of the Entrepreneurs’ relief from 6 April 2008 in respect of gains made by individuals on the disposal of certain assets, including:

• all or part of a trading business the individual carries on alone or in partnership;
  
  
• assets of the individual’s or partnership’s trading business following the cessation of the business;
  
  
• shares in (and securities of) the individual’s personal trading company (or holding company of a trading group); and
  
  
• assets owned by the individual and used by his/ her personal trading company (or group) or trading partnership.

The first £1 million of gains in a lifetime that qualify for relief will be charged to capital gains tax (CGT) at an effective rate of 10%. Gains in excess of £1 million will be charged to CGT at the rate of 18%. Disposals on or before 5 April 2008 do not affect the lifetime limit.

The relief will also be available to trustees on certain disposals of business assets and company shares and securities where a qualifying beneficiary has a qualifying interest in the business in question. Any relief given on the trustees’ gains will reduce a beneficiary's £1 million lifetime limit on relief.