Budget 2020 – Capital Gains Tax

The capital gains tax (CGT) annual exempt amount will increase from £12,000 to £12,300 from 6 April 2020 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 £6,150.

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

As announced in 2018, a reminder that, 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 in Budget 2018 that letting relief will be reformed so that it only applies when the owner of the property is in shared occupancy with a tenant.  This change comes into effect from 6 April 2020.

Also, 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

Entrepreneurs’ Relief provides for a lower rate of Capital Gains Tax (10%) to be paid when disposing of all or part of a business where certain criteria are met, subject to a lifetime limit of £10 million of qualifying gains.

This measure reduces the lifetime limit from £10 million to £1 million for Entrepreneurs’ Relief qualifying disposals made on or after 11 March 2020.

There are special provisions for disposals entered into before 11 March 2020 that have not been completed

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