Capital taxes

Capital Gains Tax (CGT)

The annual exempt amount is increased to £10,100 for individuals (£5,050 for most trustees) for 2009/10.

The rate of CGT remains 18% with entrepreneurs’ relief potentially reducing the effective rate of tax on qualifying gains to 10%.

Offshore funds

The Chancellor announced that an interest in a transparent offshore fund will be an asset for the purpose of calculating CGT on chargeable gains (as is already the case for shares in a company or units in a unit trust). Investors will no longer be required to consider disposals of the underlying assets for calculating CGT on chargeable gains.

The Government will discuss with industry how to make similar changes to the tax treatment of chargeable gains for investors subject to corporation tax.

There will be no effect on interests in tax transparent foreign partnerships which will continue to be treated as transparent for both income and gains in the same way as UK partnerships.

Inheritance tax (IHT)

The IHT allowance (nil-rate band) is increased to £325,000 for 2009/10. The transferability of the allowance gives an effective joint tax-free maximum of £650,000 for married couples and civil partnerships.

The rate of IHT remains 20% for chargeable lifetime transfers and 40% for death estates (including transfers within seven years before death brought back into the estate for the purpose of calculating the tax due at death).

Agricultural property relief (APR) and woodlands relief (WR)

Legislation will be introduced in Finance Bill 2009 to extend IHT APR and WR to property in the European Economic Area. Property qualifying for this extended IHT relief will also qualify for CGT hold over relief.

The extension of APR and WR against IHT and CGT hold over relief will have effect on and after 22 April 2009 as well as for certain earlier events.