The Budget 2016 - Capital Gains Tax
One unexpected announcement in the Budget was that Capital Gains Tax (CGT) rates will be cut from 6th April this year.
From April the higher rate of CGT will be cut from 28% to 20% and the basic rate will be cut from 18% to 10%.
There will however be an additional 8% surcharge to be paid on gains made on residential property (not including an individual’s main home, of course, which is exempt from CGT under current legislation). This means that property investors and landlords will not benefit from the cut.
This is good news for investors in shares and funds who will see their tax bills fall.
In addition to this CGT cut there was a surprise extension to “entrepreneurs’ relief” which will now apply to long-term investors in unlisted companies. With immediate effect, anyone buying newly-issued shares in an unlisted company will see their CGT liabilities capped at 10% up to an allowance of £10 million provided the shares are kept for at least three years.
In spite of ever growing complexity in terms of savings incentives and allowances there is no doubt that the government has now put in place a very generous package for those who plan carefully. From April 2016 tax payers will have:
a personal income tax allowance of up to £11,000
a dividend allowance of £5,000
a Personal Savings Allowance of up to £1,000
a CGT allowance of £11,100
an Annual Allowance for pension contributions of up to £40,000
an ISA allowance of £15,240 (rising to £20,000 in April 2017)
an annual EIS allowance of up to £1 million
an annual VCT allowance of up to £200,000
A maze, yes. A minefield, quite possibly! But plenty of scope for sound long-term planning with the right advice.
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