Capital gains tax planning - significant changes

Capital gains tax rules are changing from 6 April 2008 with a flat rate of 18% being introduced. However at the same taper relief for business and non-business assets will cease to exist. Thus for some there will be capital gains tax reductions while for others, particularly business owners, there will be increases.

Annual exemption

Each year an individual has an annual exemption to gains that are free of tax. This year it is £9,200. Thus an individual can realise net capital gains (gains less losses) of up to £9,200 from 6 April 2007 to 5 April 2008 without incurring a CGT liability. The exemption is an annual allowance and cannot be carried forward.

Please seek our advice

With the significant structural changes due to be introduced from 6 April 2008 it is more important than ever to discuss this area of planning with us. Business owners have become accustomed to thinking that capital gains tax on sale of their business is 'a maximum of 10%'. You may not be thinking of selling your business just because of the changes in capital gains tax, but please do discuss with us the 'pregnant' capital gains tax liability based on the changes introduced in the Pre Budget Report as these changes will likely impact the net proceeds from your eventual sale. The potential reduction may need to be factored into your plans for the capital available to you from the sale of your business.