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So we now know what our new government looks like, and we have an idea about what deals have been done between the parties to form the coalition. There will be a new Budget on 22 June.
On forming the coalition, one of the concessions that seems to have been granted to the Liberal Democrats is a change to the Capital Gains Tax regime. In recent years this has been relatively benign with non business assets being taxed at 18% and business assets at as little as 10%. This seems set to end with an imminent budget!
Whilst there will likely be some relief for business assets we do not know if it will be as generous as current Entrepreneurs Relief. The sting for most people will be an increase in taxation on non business assets such as share portfolios, investment properties and second homes.
Many commentators are suggesting rates of 40% or 50%, which may be extreme, but would tie in with marginal income tax rates. We may end up with a flat rate, in this regard it is worth noting that average CGT rates have been about 30%.
Whatever happens it seems likely that people selling non business assets in the future will face a higher tax charge.
There may however be an opportunity to crystallise gains now and pay CGT at the current lower rates. This can be achieved by a sale and buy back, gifts or sale to other family members or a company, or through the use of trusts. With all of these there are other taxes to consider as well so advice should be taken before embarking on any course of action. But remember the clock is ticking….
Please contact us on 01228 530913 or 01768 864466 if you would like advice on how this will affect you.
Alternatively email Valerie Young: valerie@doddaccountants.co.uk
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