Pre-Budget Report 2007: Changes to capital gains tax will create winners and losers across the region

The new Chancellor’s first Pre-Budget Report has created winners and losers across the region as a result of changes to the capital gains tax regime for individuals, trustees and personal representatives. There are no changes to the taxation of capital gains for companies.

For disposals on or after 6 April 2008, all gains realised by individuals, trustees and personal representatives will be subject to a flat rate of 18%. Previously there had been a differential rate between business and non-business assets. The rate on business assets held for more than two years will increase from 10% to 18% but there is a significant reduction in the rate for non-business assets such as second homes and quoted shares (previously between 40% and 24% depending on how long the asset was owned).

Barry Smith, Midlands head of tax, PricewaterhouseCoopers LLP said:

“This will be a bitter pill for those that had built up their business with the expectation of selling out with only a 10% tax charge. It will be interesting to see how many of these businesses in the Midlandsare sold in the period up to 5 April.”

“Conversely those who held non-business assets such as many properties will see their tax rate fall from 24% to 18%. Similarly tax payers who would have faced the 40% tax charge on assets like buy-to-let portfolios and quoted share portfolios will be pleased by these new measures.”

"As with all changes to the tax regime there will be significant winners and losers. The main losers would appear to be the entrepreneurs and private business owners that government has been seeking to encourage in recent years.”

The Chancellor doubled the inheritance tax threshold for married couples to £600,000 - and said it will rise to £700,000 from 2010. Mr Darling's announcement will enable married couples and civil partners to combine their allowances after one partner dies.”

When the widow or widower dies, the change means inheritance tax will not be charged on the first £600,000 of their estate which will give a significant benefit to an increasing number of individuals in the region.

Barry Smith, Midlands head of tax, PricewaterhouseCoopers LLP said:

“We welcome the transferability of allowances for inheritance tax which will hopefully simplify the system for those families who want to take advantage of these reliefs.”

For our complete analysis and video reactions to this year's Pre-Budget Report, please visit our main UK website.

Contact details
Email: Barry Smith
Tel: +44 (0)121 265 5000