16 March 2021
How did the budget affect Capital Gains Tax?
Well, the good news is, very little which made us all breathe a huge sigh of relief in the tax world. As a quick recap, Capital Gains Tax (CGT) is the tax payable on the profit made when you dispose of an asset. Capital Gains Tax is only payable on assets classified as “chargeable assets”, which include:
- Most personal possessions (worth over £6,000)
- A property that is not your main home
- Shares excluding those held in ISAs or PEPs
- Business assets
- Sale or gift of crypto assets (the use of cryptocurrency and bitcoin is far more widespread now, so it is worth checking on the tax implications if you are involved in this type of trading).
And on the upside, some assets have reliefs you can claim, losses to offset, and if you dispose of an asset that is owned with someone else you only pay CGT on your share of the gain, and many things are not subject to CGT, such as the gains you make from your ISAs and PEPs, your Premium Bonds, betting, lottery, or pools wins. We had one of the busiest run ups to the Budget this year, which was a result of the Office of Tax Simplification (OTS) report issued in November 2020. This suggested that CGT should have 2 rates rather than 4, the annual exemption should be reduced, scrapping certain business reliefs, and updating the capital transfer rules. Maybe it was the impact of COVID and Brexit that made the government reconsider, however these proposals were not implemented. To confirm the rates of CGT ( 10% / 20% / 18% / 28% ) and the annual exemption are staying the same (£12,300 for individuals and £6,150 for trusts) until the 2025/26 tax year.
Landlords
For landlords this is brilliant news, as the rates on residential and commercial property have remained the same, along with the extension of the Stamp Duty Land Tax holiday to the end of June 2021. This news will certainly continue to drive property sales into the 2021 summer. Additionally, Business Asset Disposal (BAD) Relief was untouched allowing business owners and entrepreneurs to obtain a CGT rate of 10% on qualifying disposals. This is based on the Lifetime Allowance of £1m for all individuals.
Business Assets
The only real change we saw for business owners was the update to the CGT Relief for gifts of business assets. This was a minor amendment, in a post Brexit world, and confirmed that Gift Hold-Over Relief is now only available for UK residents and not available where a non-UK resident person disposes of an asset to a foreign-controlled company controlled either by themselves or another non-UK resident with whom they are connected. And that’s it for the time being, nothing too exciting to be concerned with which seems comforting. You can read our review of the budget here.
Haines Watts
Our tax team is here to help. If you have losses to carry back and would like to discuss this with one of our team or have questions or concerns regarding your tax or tax planning please get in touch on the number below. To ensure you and your businesses takes advantage of any tax saving opportunities please take a look at our over view tax planning guide here.
