Capital Gains Tax

Richard Keeler
Healthcare, Tax

While changes to capital tax on business disposal was hot on the press agenda before the Budget, there were no changes announced to the current rates of capital gains tax in the Budget for 2021.

This means that the rate remains at 10% to the extent that any income tax rate band is available after 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 2 specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:

  1. Business Asset Disposal Relief (BADR) formerly known as Entrepreneur’s Relief – this is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and owners of unincorporated businesses.
  2. Investment Relief – the main beneficiaries of this relief are external investors and unquoted trading companies that have newly subscribed shares.

The lifetime limit for BADR was reduced from £10 million to £1 million for BADR qualifying disposals made on or after 11 March 2020.  Investor’s relief continues to have a lifetime limit of £10 million.

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