Budget Summary 2015/16

Capital Gains Tax

Rate of tax and annual exemption

The rate of CGT remains 18% for those whose total taxable income and gains for the year are below 31,785, and 28% for gains which are above that figure. The annual exempt amount for CGT increases by 100 to 11,100.

Entrepreneurs' Relief (ER)

ER reduces the CGT rate on qualifying disposals to 10% on up to 10m of lifetime gains. Two changes are made with effect from 18 March 2015 to restrict the availability of ER on disposals using what are called 'contrived structures'. These include someone who personally owned an asset that was used by a business selling it without at the same time disposing of a significant interest in the business itself; and disposals of shares in a company which does not itself carry on a trade, but which has in the past qualified because the activities of joint venture investments have been taken into account.

ER was also removed from gains on goodwill transferred to a company on incorporation of a sole trade or partnership from 3 December 2014. This rule has been relaxed to a small extent where a partnership is incorporated, any partner who does not acquire a stake in the new company will be eligible for ER on goodwill.

One further change was announced in the Autumn Statement and applies to disposals from 3 December 2014: where a gain that would otherwise qualify for ER is deferred by reinvestment into EIS or a qualifying social investment, the eventual disposal will also qualify for ER. Previously, the benefit of the reduced rate could be lost by deferring the gain.

Tax Tip
Retiring partners may benefit from ER on incorporation