New rate of capital gains tax to be 18%

Apr 9 2008 by Karen Dent, The Journal

CAPITAL Gains of more than £1m are now taxed at a flat rate of 18%.

The first £1m of capital gains is still taxed at 10% under a concession made by Chancellor Alistair Darling, called Entrepreneurs’ Relief.

After that, the gains are taxed at 18%.

However, Entrepreneur’s Relief can only be claimed once per person so serial entrepreneurs cannot use the benefit again if they are selling a business.

The new regulations also abolished taper relief, which was introduced in 1998 to reduce the amount of CGT due when shares were sold so accounting for the effects of inflation.

This allowed for a maximum tax relief of 40% on gains made on shares which had been held for 10 years or more.

David Richardson, of KPMG’s personal tax practice in Newcastle, said: “In the light of the new regime, it is important for individuals to reconsider their Capital Gains Tax position to assess the effect of the changes on them.

“We are finding that in some instances, where the structure of businesses had previously been influenced by the availability of taper relief, it is worthwhile discussing their structure and future plans with a view to operating within this different tax environment.”