A capital gains tax cut!

  • by Carole Jordan
  • 08 Apr, 2016
Capital gains tax cut businessheads blog

The Chancellor made a surprise decision to cut capital gains tax (CGT) in his Budget 2016 – but not for everyone.

Will the capital gains tax cut affect you?

One of the most significant changes in the last budget was the reduction in CGT rates from the previous 18% within the basic rate band and 28% for any gains in excess of the basic rate band.  

CGT rates have generally been cut by 8% from the start of 2016/17 to 10% and 20% respectively. On this occasion the Treasury says that “The government wants to ensure that companies have the opportunity to access the capital they need to grow and create jobs, and wants the next generation to be backed by a strong investment culture.”  

There are two exceptions to the reduction;

  • recipients of ‘carried interest’ (typically private equity or hedge fund managers)
  • owners of residential properties that are not their main homes (such as buy-to-let investors). These two categories will be subject to an 8% surcharge, taking their rates back to the 18% and 28% levels.

The cut in CGT rates is the second piece of good news for investors in shares, units trusts, open-ended investment companies (OEICs) and other collective share-based funds, coming as it does on top of the introduction of the £5,000 dividend allowance from 6 April 2016. The Chancellor clearly wants to encourage equity investment – at least for the time being.

But buy-to-let landlords will not benefit and with the reduction in tax relief on mortgage interest careful calculations need to be done on the expected returns on properties to be sure they are a worthwhile investment.

Property owners should take advice on their situation regularly as property tax is one of the most complex areas. 

 Contact us for professional advice on your properties at info@businessheads.co.uk, alternatively you can call Carole Jordan FCCA on 01273 882200.

All details above were correct at the time of publishing - for more up to date information please get in touch .

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