Business News

Are you prepared for the effects of the planned rise in Capital Gains Tax?

In the aftermath of this year’s General Election and the subsequent installation of the Coalition Government, it has been well publicised that this new Government intends to implement a rise in Capital Gains Tax (CGT) rates, details of which are expected in the Budget on June 22.

The date for implementation of these rises gives some cause for concern.

The current suggestions seem to be:

• An increase in CGT rates from 18% to a possible 40% or 50% on “non-business” assets such as investment property, second homes and shares;
• A reduction in the annual personal allowance (Annual Exempt Amount) which currently stands at £10,100 per person.

We may also see the restriction or abolition of hold-over (deferral) relief from CGT on gifts into trusts and on gifts of business and agricultural property as well as the loss of the exemption from CGT on gifts between married couples and couples in a Civil Partnership.

Understandably concerns about this are high, as countless businesses and individuals will be affected.  However certain steps can be taken to minimise the effects of these rises.

What can you do?

Time is of the essence, as the Budget draws closer every day.

Consider transferring now any assets held in your sole name into the names of yourself and your spouse or Civil Partner, even if a sale is not currently on the horizon, in case this valuable exemption is lost.  If a sale is imminent, transfer the asset into joint names before exchange, to secure two Annual Exempt Amounts.

If the plan is to pass on business assets or property to the next generation in the future, consider transferring these now in a known CGT environment.  If an outright gift is not suitable then use a trust to hold the asset; this allows the Giftor as trustee to keep control over the asset until ready to give the asset outright to the recipient.

If selling assets immediately, do not enter into Conditional Contracts; rather ensure exchange (tax point for CGT) is pre Budget Day.

If planning to sell a holiday home, investment property or other investment assets in the near future, consider gifting them into your own Settlor Interested trust before Budget Day which will determine the CGT rate payable.

Although big, painful changes appear to be ahead, careful planning now could mitigate the damage to your assets and finances. Please speak to us directly to discuss these.

To find out more about how working with our leading firm of accountants in Stratford-upon-Avon and Warwickshire can help you, please contact us.