Budget 2016 – CGT

Capital Gains Tax

The Chancellor has used his Budget speech to announce significant changes to the rates of Capital Gains Tax payable on gains incurred when selling the majority of assets.

The main rate of Capital Gains Tax has been reduced from 28% down to 20%, and the level of tax payable by basic rate taxpayers has been reduced from 18% down to 10%.

The Chancellor has however continued his attack on buy to let investors by adding an 8% surcharge on capital gains made on the sale of residential property. This means that buy to let investors will still be taxed at the previous rates of 28% and 18%.

The small print of the Budget announcements indicates that this is to encourage investors to purchase company shares rather than property.

Principal Private Residence relief will continue to apply on the sale of your main residence.

Entrepreneurs Relief has been extended, so that long term investors in unlisted companies will only pay a 10% tax rate on newly issued shares in unlisted companies which they purchase on or after 17 March 2016.

This tax rate will be available so long as the shares are held for a minimum of three years from 6 April 2016. A separate £10million lifetime limit will apply to gains on investments of this nature

Two other technical changes have been made to reverse previous pieces of anti avoidance legislation which could have prevented taxpayers from benefitting from Entrepreneurs Relief when realising Capital Gains in shares in a joint venture company, or on associated disposals. These welcome amendments have been backdated to March 2015 to reverse the changes made in the 2015 Budget.

The annual Capital Gains Tax exemption was held at £11,100 for the 2016/17 tax year.

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Nov 20

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