Budget 2010

Capital Taxes

Capital gains tax (CGT) annual exemption

The annual exemption for 2010/11 is frozen at £10,100. For most trusts the exempt limit remains at £5,050.

CGT rates of tax

For individuals and trustees capital gains continue to be charged at 18%.

Entrepreneurs’ Relief

The amount of an individual’s gains that can qualify for Entrepreneurs’ Relief are currently subject to a lifetime limit of £1 million. For trustees, the £1 million limit is that of the beneficiary of the settlement who meets the conditions for the trustees to claim the relief. Gains qualifying for the relief are charged at an effective rate of 10%.

This limit will be increased to £2 million for disposals on or after 6 April 2010.

Inheritance tax (IHT) nil rate band

As previously announced, the nil rate band for 2010/11 will be frozen at the current level of £325,000. This will now be extended to cover the tax years 2011/12 to 2014/15.

Stamp duty land tax (SDLT)

At present the SDLT rate is 1% for residential property purchases where the consideration is more than £125,000 and up to £250,000.

Legislation will be introduced in the Finance Bill to give relief from SDLT where the consideration is more than £125,000 but not more than £250,000. This relief will apply where the purchaser or all the purchasers are first time buyers and intend to occupy the property as their only or main home.

The new relief will be available for residential property purchases where the effective date (normally the date of completion) is on or after 25 March 2010 and before 25 March 2012.

The current highest SDLT rate of 4% applies to residential property purchases where the consideration exceeds £500,000. A new rate of 5% will be introduced for transactions in residential property where the consideration exceeds £1 million.

This new higher rate will apply where the effective date is on or after 6 April 2011.

SDLT partnerships anti-avoidance

Some companies and individuals currently exploit the SDLT partnerships rules to artificially reduce the SDLT payable on certain land transactions. Legislation will be introduced to ensure that existing SDLT anti-avoidance rules apply to prevent this. This measure will generally apply to transactions caught by the rules with an effective date on or after 24 March 2010.

If you would like to discuss any of the above please contact us.

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