Good news for entrepreneurs
09 April 2010
It was widely anticipated that an increase in the level of capital gains tax ("CGT") would be announced in Budget 2010, however, the only change was an increase in the lifetime allowance for entrepreneurs' relief ("ER") from £1 million to £2 million.
ER was introduced in 2008 when the CGT regime in the UK was overhauled and a flat rate of 18% was introduced. It is a lifetime relief that can be claimed by individuals on the disposal of a business or certain shares or securities of a trading company. A proportion of any qualifying gains is exempt from CGT giving an effective rate of 10% on these gains. ER was limited to the first £1 million of gains between 6 April 2008 and 5 April 2010, but this cumulative limit has been increased to £2 million in relation to disposals on or after 6 April 2010.
As the relief is a lifetime allowance, if the previous £1 million limit was used between 6 April 2008 and 5 April 2010, a further £1 million of relief will be available from 6 April 2010 but only in relation to gains realised on or after 6 April 2010.
This will be welcome news to entrepreneurs and growing businesses, however it is thought that the measure is likely to cost the government £170 million over the next three years.
For further information please contact Clare Henderson by email or by telephone 0117 307 6858.