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2011 AUTUMN STATEMENT INTRODUCTION »
CAPITAL TAXES
CGT rates
The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs' Relief (ER) is 10% with a lifetime limit of £10m for each individual.
No announcement has been made of the rates for next year.
Comment
The ER limit is very generous and owners of businesses should ensure that they meet all the conditions necessary to secure the relief throughout the twelve months up to the date of a disposal.
CGT annual exemption
The CGT annual exemption has been frozen at £10,600 for 2012/13.
Inheritance tax (IHT) nil rate band
The IHT nil rate band remains frozen at £325,000 until 6 April 2015.
Reduced rate of IHT for the charitable
The Government will introduce a reduced rate of IHT for an estate where a minimum level of legacy has been left by the deceased to charity. The actual legacy to charity remains exempt from IHT and it is the rate of tax on the balance of the estate that would be reduced to 36% from 40%.
The intention is that the reduced rate will apply where charitable bequests satisfy a 10% test. A comparison will be made between:
- the total value of charitable legacies for IHT purposes and
- the value of the net estate as reduced by:
- any available nil rate band
- the value of assets passing to the surviving spouse or civil partner and
- other IHT reliefs and exemptions for example Business Property Relief.
If the first figure is at least 10% of the second then the balance of the estate will qualify for the reduced IHT rate of 36%.
The changes will apply to estates where the individual dies on or after 6 April 2012.
Comment
Because the benefit of the reduced IHT rate will be dependent on whether or not the amount of the charitable legacy is sufficient for the estate to pass the 10% test there will be a 'cliff edge' effect. Where the amount of the charitable legacy is close to the critical 10% point, a small difference to the amount of the legacy could have a much larger impact on the estate's IHT liability. There are no plans to apply any taper or other mechanism to mitigate this.
2011 AUTUMN STATEMENT INTRODUCTION »
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