Budget 2008

CAPITAL TAXES

Capital gains tax

The 2008/09 capital gains tax annual exemption will be £9,600 and the exemption for trusts will generally be £4,800.

Capital gains tax reform

Indexation and taper relief will no longer apply to disposals by individuals and trustees after 5 April 2008. Any gains realised on disposals from 2008/09 will be subject to a flat 18% tax rate.

Entrepreneurs’ relief will apply to gains on disposals of trading businesses and shares and securities of a qualifying trading company. Assets owned by an individual and used in his or her qualifying trading company or partnership will also qualify for relief on an associated disposal. The assets in question must have been held for at least one year and the relief must be claimed. Furnished holiday lets will qualify, but other types of property letting businesses will not. There is no minimum age limit, but the relief is subject to a cumulative lifetime allowance of £1,000,000 of qualifying gains. The effective rate of capital gains tax payable on qualifying gains is 10%. Trustees who hold qualifying business assets may claim the relief in conjunction with the relevant beneficiary.

Think Ahead

Don’t sell a buy-to-let property until after 5 April 2008. The flat-rate of 18% capital gains tax from 2008/09 is likely to produce a much lower tax bill than on a sale in the current tax year. However the opposite might be true if your property qualifies under the furnished holiday lettings rules.

Inheritance tax

The 2008/09 inheritance tax nil rate band is £312,000. As announced in the Pre-Budget Report, up to 100% of the unused proportion of a deceased spouse’s or civil partner’s nil rate band can be claimed on the death of the survivor, if the death occurred on or after 9 October 2007.

Stamp taxes

The rates and thresholds for stamp duty land tax are unchanged.

Buyers of new zero-carbon flats with a purchase price on first sale of up to £500,000 will not be liable to stamp duty land tax. Purchases on or after 1 October 2007 will qualify if the buyer claims the relief by 30 September 2012. Transfers of an interest in a property within a property investment partnership will not be subject to stamp duty land tax.

There will be no charge to stamp duty on instruments transferring stocks and shares unless the duty would exceed £5. This applies from 13 March 2008.

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This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act is passed. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

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