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Budget tax reduction and relief extension explained

Harmer Slater Sutton’s business advisers and accountants has released more details about key measuresannounced in the recent budget.

In a surprise announcement, the Chancellor has announced that effective from 6 April 2016, the Capital Gains Tax (CGT) rates for standard rate taxpayers is to be cut to 10% (from 18%) and for higher rate taxpayers to 20% (from 28%).

The new rates will not apply to the sale of residential property that does not qualify for private residence relief. Any CGT applicable on the sale of residential property and carried interest (the share of profits or gains that is paid to asset managers) will have an 8% surcharge effectively being taxed at the old CGT rates.

The Chancellor also featured entrepreneurs’ relief.

Entrepreneurs’ relief applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where entrepreneurs’ relief is available, CGT of 10% is payable in place of the standard rate.

There are a number of qualifying conditions that must be met in order to qualify for the relief. The lifetime limit means that individuals can qualify for the relief more than once, subject to the overriding condition that the standard rate of CGT will be charged once the total amount of qualifying capital gains exceed £10 million.

In the 2016 Budget, the Chancellor announced that entrepreneurs’ relief is to be extended to external investors in unlisted trading companies. This new investors’ relief will apply a 10% rate of CGT to gains accruing on the disposal of ordinary shares in an unlisted trading company held by individuals, that were newly issued to the claimant and acquired for new consideration on or after 17 March 2016.

The shares must be held for a period of at least three years starting from 6 April 2016 to qualify for the relief. A person’s qualifying gains for this investors’ relief will be subject to a separate lifetime cap of £10 million.


Harmer Slater are an independent firm of chartered accountants and business advisers located in Sutton, close to central London with experience in dealing with listed and unlisted businesses operating across a range of industries in the UK and overseas. For full details go to HARMER

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