Sign in to Cofunds

Contact Us | About Us | Site Map

• Home
• Services for Clients
• Services for Business

Investment Valuation Service

Callback Enquiry

Product Guides

Testimonials

How Much?

Investors have an annual exemption (£9,600 in tax year 2008 / 09), but can easily slip over their limit when selling a big item, such as a second home or buy-to-let property, saddling them with a bill for tens of thousands of pounds or more.

The CGT regime has been made much simpler as a result of tax reforms in Budget 2008. In place of a complex system of indexation and taper reliefs, capital gains above the annual exemption limit are taxed at a flat rate of 18%.

The only reduction to the 18% CGT rate is entrepreneurs' relief, which may be available in respect of gains made on the disposal of:

• All or part of a trading business the individual carries on alone or in partnership;
• Assets of the individual's or partnership's trading business following the cessation of the business;
• Shares in (and securities of) the individual's "personal" trading company (or holding company of a trading group);
• Assets owned by the individual and used by his / her "personal" trading company (or group) or trading partnership.

The first £1 million of gains that qualify for relief will be charged to CGT at an effective rate of 10%. Gains in excess of £1 million will be charged to CGT at the rate of 18%. Claims for entrepreneurs' relief on qualifying gains may be made on more than one occasion up to a 'lifetime' limit of £1 million.

Trustees will be able to claim relief on certain disposals of business assets and company shares and securities where a "qualifying beneficiary" has a qualifying interest in the business in question. Trustees must make claims jointly with the "qualifying beneficiary". Any relief given on the trustees' gains will reduce a beneficiary's £1 million lifetime limit on relief.

Tax Reform Winners

As a result of the change to CGT, some recent buy-to-let investors could be big winners. If you bought a property solely as an investment two years ago and you have made a large gain on it, you'll now pay 18% on the whole gain.

Had you sold the property in tax year 2007 / 08, a basic-rate taxpayer would pay at 20% up to the basic rate limit and the balance at 40%, while a higher-rate taxpayer would pay 40% on the whole lot!

Even so, how can you lessen the burden of this tax, and maximise your profits on any assets which face CGT? Planning ahead to prepare for this tax can save you a tidy sum, and there are various ways to make the most of your tax-free allowances.