UK Emergency
Budget 2010

In practice, this means that if your total taxable income and gains after all allowances (capital losses, the income tax personal allowance and the CGT annual exempt amount) add up to less than £37,400, then capital gains tax is charged at 18%. For gains (after 22 June) above this amount the tax will be 28%. Gains before 23 June are still taxed at 18% and you do not have to take them into account in working out the rate at which your post-22 June gains are taxed.

The coalition document promised "generous relief for entrepreneurs" and this is reflected in the increase in the lifetime limit for entrepreneurs’ relief to £5m. In outline, entrepreneurs’ relief applies to people who sell trading businesses when they have worked in the business for at least a year. If the business is a company, they need to have held at least 5% of the ordinary shares for at least a year. From 23 June, a gain of up to £5 million is taxed at only 10%.

The new 28% CGT rate applies to trustees and to the personal representatives of deceased persons. Also, if you are not domiciled in the UK and pay the £30,000 "remittance basis charge" you are deemed to use your full lower rate band allowance and any capital gains will be taxed at 28%.

There are a number of planning strategies still available. Although the CGT rate has increased, it is still some way below the income tax rates of 40% and 50%, meaning that investments which produce capital returns might still be worth considering from a tax point of view. More then ever, it is worth spouses and civil partners ensuring that they take full advantage of both parties’ lower rate bands and annual exempt amounts to minimise tax.

Other headlines

The Liberal Democrats’ influence appears to have led to the income tax personal allowance being raised from 2011/12 to £7,475. However, the basic rate limit will be reduced so that higher rate taxpayers do not benefit.

VAT is to be increased from 17½% to 20% from 4 January 2011, with anti-forestalling legislation in place to stop people bringing forward larger transactions to avoid paying the higher rate.

The main rate of corporation tax is to reduce from 28% to 27% in April 2011, and then gradually to 24% in 2014. Small companies will pay 20%.

People who are members of pension schemes will not be required to buy an annuity at age 75. The precise details are still to be agreed.

Watch this space

A number of consultations have been announced, covering a variety of topics, such as:

• Pension Contributions – possibly a partial reversal of the high income excess relief charge announced last year
• Improving the Gift Aid system
• A review of the tax legislation for non-domiciliaries
• Tax policy making
• A possible general anti-avoidance rule

We expect to see some of the results of these in the 2011 Budget.