Budget 2018 – Capital Gains Tax

The capital gains tax (CGT) annual exempt amount will increase from £11,700 to £12,000 from 6 April 2019 for individuals, personal representatives of deceased persons and trustees of certain settlements for the disabled. The annual exempt amount for most other trustees will be £6,000.

For capital gains above the annual exempt amount the CGT rate for basic and higher rate tax payers will remain at 10 and 20 per cent respectively.

Gains on residential properties (not qualifying as your personal private residence) and carried interest (the share of profits or gains that is paid to asset managers) will remain at the 18 and 28 per cent for basic and higher rate tax payers respectively.

Residential properties

Currently, if an individual sells a property that they have both lived in and rented out during their period of ownership, there is a capital gains tax relief – letting relief – that potentially reduces the taxable gain.  The Chancellor announced that letting relief will be reformed so that it only applies when the owner of the property is in shared occupancy with a tenant.  There will be a consultation on the details.

For disposals of residential property by UK residents made on or after 6 April 2020, a return in respect of the disposal must be made to HMRC within 30 days of the disposal, and a payment on account made at the same time. The self-assessed calculation of the amount payable on account takes into consideration unused losses and the person’s annual exempt amount. The rate of tax for individuals is determined after making a reasonable estimate of the amount of taxable income for the year.  No return will be required if no tax is due (for example, for disposals covered by private residence relief).

Entrepreneurs’ Relief

There were some amendments announced to the qualification rules for Entrepreneurs’ relief.

Firstly, there are two new tests introduced, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company.

In addition, the minimum period for the qualifying conditions to be met was increased from one to two years.

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