Capital gains tax (CGT) rates
The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for private residence relief.
There are two specific types of disposal which potentially qualify for a 10% rate, both of which have a lifetime limit of £10 million for each individual:
• Entrepreneurs’ Relief (ER). This is targeted at working directors and employees of companies who own at least 5% of the ordinary share capital in the company and the owners of unincorporated businesses
• Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares.
CGT annual exemption
The CGT annual exemption is £11,700 for 2018/19 and will be increased to £12,000 for 2019/20.
With effect for disposals on or after 29 October
2018, a new test will be added to existing tests that
determine if a company is an individual’s personal
company for entrepreneurs’ relief. The new
condition requires the individual to be beneficially
entitled to at least 5% of the company’s
distributable profits and 5% of its assets available
for distribution to equity holders in a winding-up.
The minimum period throughout which
certain conditions must be met to qualify for
entrepreneurs’ relief, for example the period a
business must be carried on immediately prior to
a disposal, is to be increased from one year to two
years. This will apply to disposals on or after 6 April
2019, except that where the claimant’s business
ceased, or his personal company ceased to be
a trading company (or the holding company of a
trading group), before 29 October 2018, the preexisting
one-year qualifying period will continue to
As previously announced, the Government will
legislate to allow individuals whose shareholding
is diluted below the 5% qualifying threshold for
entrepreneurs’ relief as a result of a new share
issue to obtain relief for gains up to that time,
subject to conditions. The change will apply
where a company ceases to be the individual’s
personal company as a result of its issuing shares
on or after 6 April 2019. Following consultation,
changes are being made to clarify and improve
the computational and qualifying rules in the draft legislation.
Stamp Duty Land Tax: relief for first-time buyers
The chancellor announced relief up to the value of £500,000 back-dating from 22nd November 2017, so that those eligible who haven’t previously claimed first-time buyers’ relief will be able to amend their return to claim a refund. This measure does not apply in Scotland or Wales
CGT private residence relief
It is proposed that from April 2020 the government will make two changes to private residence relief:
• the final period exemption will be reduced from 18 months to 9 months. There will be no changes to the 36 months that are available to disabled persons or those in a care home
• Lettings Relief will be reformed so that it only applies in circumstances where the owner of the property is in ‘shared-occupancy’ with a tenant.
The government will consult on the detail of both of these changes and other technical aspects.