Budget 2021 – Capital Gains Tax

The rumoured changes to capital gains tax (CGT) failed to materialise. (Watch this space though because there will be a ‘Tax Day’ on 23 March where consultations on future tax changes could be announced).

For the tax years 2021-22 to 2015-26, the capital gains tax (CGT) annual exempt amount will remain frozen at £12,300 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

A reminder that, 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 £1 million of qualifying gains.

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