By MIKE NEUMANN 23/06/2010
Many people had been bracing themselves for a steep rise in CGT, with the pain possibly compounded by the return to complicated indexation. As it happens, the rise in CGT for higher rate tax payers to a flat 28% was less than many commentators had expected.
The rate for lower rate income tax payers remains at 18% and only rises to 28% once total taxable gains and income exceed the upper limit of the income tax basic rate band. The annual exemption allowance for the current year remains at £10,100. Some commentators had predicted a reduction in this allowance. Furthermore, in calculating the CGT payable, tax payers will be able to deduct losses and the annual exemption allowance in the way which minimises the tax due.
These measures are less punitive than many had feared. The rate increase is less than expected and its impact will not be as far reaching as previously thought. Married couples should be able to transfer assets to the lower rate paying spouse prior to a disposal to help mitigate against the new higher rate. We think that investments that provide a return solely by means of capital gain, such as zero dividend preference shares, remain attractive.
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