Budget Analysis 2011 – Capital Tax

3. Capital Taxes

a. Capital Gains Tax

i. Entrepreneurs’ Relief (ER)

The lifetime limit on gains qualifying for relief will be increased from £5m to £10m with effect for qualifying disposals arising on or after 6 April 2011.

There are no other changes to the rules or conditions relating to ER.

The increase in the lifetime limit for ER was a welcome surprise especially for those contemplating a sale in the near future. However, in view of the tightly drawn qualifying conditions it is important that business owners regularly review their entitlement.

ii. Annual Exemption

The CGT annual exemption will rise to £10,600 for 2011/12 as previously announced. Going forward, the exemption will increase in line with the consumer prices index instead of the retail prices index

b. Inheritance Tax

The inheritance tax nil rate band is frozen until April 2015.

Subject to consultation, a reduced rate of IHT will apply where 10% or more of a deceased net estate is left to charity. In such circumstances, the current 40% rate will be reduced to 36% in respect of deaths occurring on or after 6 April 2012.

The increase in the lifetime limit for ER was a welcome surprise especially for those contemplating a sale in the near future. However, in view of the tightly drawn qualifying conditions it is important that business owners regularly review their entitlement.