News: March 2012

Capital taxes

CGT

There has been no change in the rates or thresholds for capital gains tax (CGT).
The rates for 2012/13 are…

• Annual exemption – £10,600
• Annual exemption for most trustees – £5,300
• Rate for gains in basic rate band – 18%
• Rate for gains above basic rate band – 28%
• Rate for gains subject to entrepreneurs’ relief – 10%
• Lifetime limit for entrepreneurs’ relief – £10,000,000

Overseas Owners

Currently only UK resident individuals pay CGT on gains, even when the property is located in the UK. The Government is considering how CGT can be applied to gains made on residential property in the UK, when the owner is resident in another country. Any changes will apply from April 2013 at the earliest.

Employee Shares

If you acquire shares through an approved share option scheme run by your employer, you must pay CGT on gains made when you sell those shares, after deduction of your annual exemption. The CGT will be charged at 18% or 28%, as the conditions for the entrepreneurs’ relief rate of 10% are unlikely to be met. The Government is considering changing the rules for approved share option schemes so the 10% rate can apply to shares acquired by employees. Any changes will apply from 6 April 2013 or later.

Inheritance Tax

The inheritance tax (IHT) nil rate band remains frozen until 2014/15. This is the amount of a person’s estate that is free of inheritance tax. However, for deaths occurring on and after 6 April 2012, when at least 10% of their estate has been left to charity, a reduced rate of IHT applies to the chargeable estate. Gifts made to charities are exempt from IHT.

The limits and rates for 2012/13 are…

• Nil rate band: £325,000 (2011/12 – £325,000)
• Rate payable on death: 40% (2011/12 – 40%)
• Rate payable when 10% of estate left to charity: 36% (2011/12 – 40%)
• Rate payable on lifetime gifts to certain trusts: 20% (2011/12 – 20%)

Stamp Duty

You pay stamp duty when you purchase a property in the UK. There has been a lot of talk about how some people have avoided paying SDLT on high value homes. The tax avoidance scheme usually involves an off-shore company.

To deal with such schemes the Government has introduced new rates of SDLT on purchases of residential property valued at over £2 million:

• 7% charge on purchases by individuals from 22 March 2012; and
• 15% charge on purchases made on or after 21 March 2012, by companies, collective investment schemes, or partnerships where a member is a company or a collective investment scheme

An annual tax charge may also be applied to the value of residential property held by certain companies, where each property is worth over £2 million. Any such charge will apply from April 2013.