Capital Taxes 2011

Capital gains tax (CGT) annual exemption

The annual exemption will increase in line with statutory indexation to £10,600 for 2011/12. From 6 April 2012, the annual exemption will be indexed by reference to the CPI instead of the RPI.

SAVER: Share your gains

If you are a higher or additional rate taxpayer, you will pay 28% on all capital gains above your annual exemption. If your spouse or civil partner is a basic rate taxpayer, they will only pay 18% on gains above their annual exemption until their basic rate tax band is exhausted.

CGT entrepreneurs’ relief

The lifetime limit on gains qualifying for entrepreneurs’ relief will rise from £5 million to £10 million from 6 April 2011. Qualifying gains are taxed at 10% rather than 18% or 28%.

CGT rollover relief

Legislation will be included in the Finance Bill 2012 to restore CGT rollover relief for disposals of entitlement to payments under the EU’s single payments scheme for farmers.

Inheritance tax (IHT)

The IHT nil-rate band will be indexed by reference to the CPI instead of the RPI from 6 April 2015. Until then it is frozen at £325,000.

New IHT avoidance schemes involving some transfers into trust will have to be disclosed under the disclosure of tax avoidance schemes (DOTAS) rules from 6 April 2011.

A reduced rate of 36% will be charged where 10% or more of a deceased person’s net estate (after deducting IHT exemptions, reliefs and the nil-rate band) is left to charity. The measure will apply where death occurs after 5 April 2012.

THINK AHEAD: Now may be the time to make lifetime gifts

The Office for Tax Simplification has concluded that ‘there should be a proper review of inheritance tax’. Any reform seems unlikely to make the current treatment of outright lifetime gifts more favourable than today’s rules for potentially exempt transfers.

Stamp duty land tax (SDLT)

Bulk purchasers of residential property will be able to claim a new relief under which the rate of SDLT is determined by using the mean consideration per dwelling instead of the aggregate consideration. The relief will be available for transactions on or after Royal Assent to the Finance Bill 2011. In the autumn, the Government will announce the outcome of its review of the SDLT relief for first-time buyers.

Legislation in the Finance Bill 2011 will aim to ensure that SDLT-avoidance schemes exploiting three areas do not work. The changes clarify the relationship between the rules for sub-sales and alternative finance, narrow the definition of ‘financial institution’ for alternative finance and counter the effect of an engineered reduction in market value when properties are exchanged

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