Looking good for capital gains tax

on Thursday, 25 August 2016. Posted in Company News

Looking good for capital gains tax

The capital gains tax (CGT) measures announced in the March Budget are generally good news for investors.

For 2016/17, the higher rate of CGT has been cut from 28% to 20%, with the basic rate dropping from 18% to just 10%. If you are sitting on investments that have, for example, increased in value by £100,000, then the tax cost of selling them has just been cut by £7,112. The increase in the difference between income tax and CGT rates will make investing for capital growth, rather than income, even more attractive.

However, the CGT rates for property investors and landlords remain unchanged at 18% and 28%.

External investors in trading companies

Entrepreneurs’ relief has been extended to external long-term investors by the introduction of what is effectively a separate investors’ relief. Shares must be:

    • Newly issued, and have been acquired by subscription for new consideration wholly in cash;
    • In an unlisted trading company, or an unlisted holding company of a trading group;
    • Issued on or after 17 March 2016; and
    • Held for a continuous period of three years starting on or after 6 April 2016.

For the investors’ relief, the external investor must not be an employee or an officer of the company. Investors’ relief comes with its own separate £10 million lifetime limit, running in parallel with the entrepreneurs’ relief limit. Gains qualifying for investors’ relief benefit from the 10% tax rate.

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