Capital gains tax was introduced in 1965 to tax profits made on the disposal of personal property. It only applies to individuals – companies pay corporation tax on chargeable gains instead. There are quite a few exemptions such as private cars, most personal chattels, life assurance policies, foreign currency and, most importantly, your own principal private residence. In general, capital gains tax is only charged on assets held for their investment potential such as shares, land and property, business assets, antiques and works of art.
The capital gains tax regime has undergone many changes and makeovers down the years, most recently in 2020 when letting relief was abolished for most landlords and the final period of ownership for main residence relief was reduced to 9 months in the vast majority of cases. There were also major changes in 2007 when the Labour Chancellor, Alistair Darling, abolished taper relief and what was left of indexation allowance. These were both time-based and recognised the effects of inflation on the value of your property, so for the first time since 1982 we are now paying tax on inflationary gains. Following a huge uproar from the small business community, who were faced with seeing tax on their retirement nest eggs almost doubled, Darling sweetened the pill by introducing Entrepreneurs Relief, now known as Business Asset Disposal Relief. The lifetime limit on this was £10 million at one point but is now back down to where it started at £1 million.There are quite a few tax planning techniques that can be used to reduce or defer your capital gains tax liability. Please give us a call if you would like us to review your assets and advise you on your personal tax strategy. Meanwhile, the information sheets and tax tips below will tell you more.
