Capital tax is a tax levied on a corporation based on assets rather than income. In2021, CGT generated £10.6 bn. This figure is rising as property and investment prices climb. Therefore, the Chancellor froze most CGT reliefs. Keep informed of changes.
The following sections highlight the Capital Tax allocation in the Spring Budget on personal tax:
Capital Gains Tax Rates:
Capital Gains Tax is the tac on the profit when you sell or dispose of something (like an asset) that’s increased value.
The current capital gains tax rates are 10%, to the extent that any income tax basic rate band is available, and 20% after. Higher rates of 18% and 28% may apply for certain gains, mainly chargeable gains on residential housing except for any element that qualifies for private residence relief.
Two specific types could qualify for a 10% rate:
- Business Asset Disposal. This focuses on working directors and staff of companies who own a minimum of 5% of the ordinary share capital in the business and the owners of unincorporated businesses. Business Asset Disposal Relief has a lifetime limit of £1m for each person.
- Investors’ relief. The individuals who would benefit from this relief are external investors in unquoted trading businesses with newly-subscribed shares. This has a lifetime limit of £10m for each person.
CGT Annual Exemption:
The Capital Gains Tax annual exemption is £12,300 for 2022/23. This will remain frozen until April 2026.
Reporting Capital Gains Tax → in April 2020, The Chancellor introduced new reporting and payment on account obligations for chargeable gains on residential property. After selling UK residential property, the deadline to register and pay CGT has increased from 30 days to 60 days.
Inheritance Tax Nil Rate Bands:
The nil rate band has been £325,000 since April 2009 and will remain frozen until 2026.
IHT residence nil rate band → The RNRB was introduced back in 2017. This makes it easier to pass down a family home to direct descendants.
The rate of the RNRB is £175,000 for 2022/23. You must meet the conditions set to access the RNRB.
The relief available following a second death can be doubled for married couples and civil partnerships. Each person has a primary nil rate and a residence nil rate band that passes on the death of the surviving people.
Charitable giving → A reduced rate of inheritance tax applies where 10% or more of a deceased’s net estate is left to charity. The 40% rate will be reduced to 36% in these cases.
If you require any assistance or have a question, please don’t hesitate to contact the team and we will be happy to help.