The new Capital Gains Tax (CGT) regime was introduced on 6 April 2008. At that time the old scheme, based on the taxation of capital gains with a partial allowance for inflation and a reduction (in effect) for holding assets for longer periods, was abolished. The link between the rate of tax payable and the taxpayer’s marginal rate of income tax was also abolished. The ‘tax free’ lower band is retained, with £9,600 of an individual’s chargeable gains currently tax free.

The new scheme features a flat rate of CGT of 18 per cent, with specific reliefs, the most important of which is entrepreneur’s relief, the most important aspects of which are as follows:

• The first £1 million of gain attracts a 4/9ths relief, making the effective tax rate 10 per cent;
• The £1 million limit is cumulative over a taxpayer’s lifetime, so gains taking total gains over the £1 million limit will attract no relief on the excess. This represents bad news for ‘serial entrepreneurs’;
• The relief applies to gains arising from the disposal of all or part of a trading business or shares in a trading company or its holding company. There are certain restrictions applying to the relief where the sale is a sale of shares; and
• Associated disposals (e.g. the sale of a property and a business associated with it) will also qualify for the relief.

In certain circumstances, trustees may also benefit from the relief where qualifying assets are held in trust.

However, there are a number of restrictions to the availability of entrepreneur’s relief.

If you are considering disposing of assets or require assistance with any matter to do with the preservation of family wealth, contact us for advice.