Posted by admin - April 1, 2016 1:50 pm
Changes to Capital Gains Tax
Are you up to date?
George Osborne made the surprise announcement in the recent budget of a cut in Capital Gains Tax (CGT) – from 28% to 20% for higher rate taxpayers, and 18% to 10% for those on the basic rate.
The rates of Capital Gains Tax, which is a tax on the profits made from the sale of assets, will be cut from April, except on residential property sales where it will remain unchanged at 18% for basic rate taxpayers and 28% for higher rate taxpayers. The CGT tax-free allowance will also remain unchanged at £11,100.
Why the change?
The Government wants to create a strong enterprise and investment culture. Cutting the rates of CGT for most assets is intended to support companies to access the capital they need to expand and create jobs. Retaining the 28% and 18% rates for residential property is intended to provide an incentive for individuals to invest in companies over property. Reducing the rate for buy to let properties may have created a surge in landlords selling property and, in turn, caused property prices to plummet as supply exceeds demand.
Government sources indicated that they thought about 130,000 people would gain from the tax cut, of whom about 50,000 are basic rate taxpayers and 80,000 higher rate taxpayers.
On top of the CGT cut, ‘entrepreneurs’ relief’ will also be extended to long-term investors in unlisted companies. Starting immediately, anyone buying newly-issued shares in an unlisted company will see their CGT capped at 10 per cent up to an allowance of £10 million, provided they are kept for at least three years.
The distance between income tax rates and CGT rates will make drawing on capital each year as a form of income even more attractive than it currently is. Alongside the changes to the taxation of dividends and the normal annual capital gains allowance, the reduction in CGT rates makes directly held stocks and share investments very attractive in certain situations.
For further details about CGT or any other taxation matter which you want to check following the spring Budget contact your local MFW office.
To book a free consultation call your local MFW office Ashford, Cranbrook, Dover, Herne Bay, Maidstone and Sittingbourne.
