The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for Private Residence Relief.
There are two specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:
Investors’ Relief has a lifetime limit of £10 million, however the lifetime limit position for ER has been changed in the Budget and is considered further below.
The CGT annual exemption is £12,000 for 2019/20 and £12,300 for 2020/21.
The lifetime limit is reduced from £10 million to £1 million for ER qualifying disposals made on or after 11 March 2020.
There are special provisions for disposals entered into before 11 March 2020 that have not been completed.
Draft legislation has been issued to make changes to the PRR regime from 6 April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be amended as follows:
Legislation has been enacted to change reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. Also introduced is a requirement to make a payment on account of the associated CGT liability. For disposals made on or after 6 April 2020:
The return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.
The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by PRR.
The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2021. An additional nil rate band, called the ‘residence nil rate band’ (RNRB), continues to be phased in. For deaths in 2019/20 it is £150,000 rising to £175,000 for deaths in 2020/21. Thereafter it will rise in line with CPI.
A SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland is to go ahead. The 2% surcharge is to take effect from 1 April 2021. Where contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, transitional rules may apply.
If you have any questions about how these changes affect you, your family or your business, contact our Tax team here or call us on 01325 349700. Read more of the 2020 Budget summary:
Read more of the 2020 Budget summary:
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