Capital taxes

Capital Gains Tax (CGT)

The annual exempt amount is £10,100 for individuals (£5,050 for most trustees) for 2010/11.

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

Entrepreneurs' Relief

With effect from 6 April 2010, the Chancellor announced an increase in the lifetime limit for Entrepreneurs’ Relief to £2 million.

The new limit will apply only to disposals on or after 6 April 2010. Where individuals or trustees make qualifying gains above the previous £1 million limit before 6 April 2010, no additional relief will be allowed for the excess above the old limit. But if they make further qualifying gains after 5 April 2010, they will be able to claim relief on up to a further £1 million of those additional gains, giving relief on accumulated qualifying gains up to the new limit of £2 million.

Inheritance tax (IHT)

The IHT allowance (nil-rate band) has been frozen at £325,000 for 2010/11 to 2014/15. The transferability of the allowance gives an effective joint tax-free maximum of £650,000 for married couples and civil partners.

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).