This post discusses the latest changes to Capital Gains Tax as outlined in yesterday’s budget.
Capital gains tax (CGT) annual exempt amount
The annual exempt amount, currently £10,600, will rise to £10,900 for 2013/14, £11,000 for 2014/15 and £11,100 for 2015/16.
TIP: Share your gains. If you are a higher or additional rate taxpayer, you will pay 28% on all capital gains above your annual exemption. If your spouse or civil partner is a basic rate taxpayer, they will only pay 18% on gains above their annual exemption until their basic rate tax band is exhausted.
Residential property valued at more than £2 million
An annual residential property tax (ARPT) will be introduced from 1 April 2013 for residential properties valued at more than £2 million (generally as at 1 April 2012) that are held by certain non-natural persons such as companies. Following consultation, exemptions are being introduced for charities and certain others.
CGT at 28% will be charged on gains accruing after 5 April 2013 on disposals by certain non-natural persons of UK residential property that has been subject to the ARPT.
Reliefs will be introduced to the 15% rate of stamp duty land tax on residential property valued at more than £2 million and purchased by certain non-natural persons. They will take effect from the date of Royal Assent to Finance Bill 2013.
Enterprise management incentives (EMI)
Entrepreneurs’ relief will be extended to cover gains made on shares acquired through the exercise of EMI options and will apply to qualifying share disposals from 6 April 2013.
Inheritance tax (IHT)
The nil-rate band will remain at £325,000 until 2017/18. The IHT-exempt amount that a UK domiciled individual can transfer to their non-UK domiciled spouse or civil partner will increase from £55,000 to £325,000 from 6 April 2013. Non-UK domiciled individuals married to, or in a civil partnership with, a UK domiciled individual will be able to elect to be treated as UK domiciled.
New legislation will ensure that the switching of UK assets in a trust settled by a non-UK domiciled individual to investments in open ended investment companies (OEICs) and authorised unit trusts (AUTs) is exempt from IHT with effect from 16 October 2002.
Alternative Investment Market (AIM) and other shares
Stamp duty will be abolished from April 2014 on transactions involving shares in companies listed on markets such as AIM and the ISDX Growth Market. The government is consulting on how these shares should be included within ISAs.
THINK AHEAD: ISAs and AIM shares. The government has confirmed it will soon be allowing AIM shares to be held within ISAs. It has also said that AIM shares held within an ISA will qualify for inheritance tax business property relief, subject to the usual rules. So your ISA could soon be free of UK income tax, capital gains tax and inheritance tax.
Stamp duty land tax (SDLT)
Measures will be introduced to put beyond doubt that certain SDLT avoidance schemes that abuse the transfer of rights rules do not work, with retrospective effect from 21 March 2012.
The SDLT rules will be reformed for ‘transfers of rights’ and certain non-standard lease transactions. These will take effect from Royal Assent to Finance Bill 2013.
Stamp duty reserve tax
The stamp duty reserve tax charge in Schedule 19 Finance Act 1999 on surrenders of units in collective investment schemes will be abolished from 1 April 2014.