CGT and Non-Business Assets
Much has been made of the Capital Gains Tax (CGT) changes, regarding the taxation of business assets, due to the abolition from 6 April 2008 of ‘taper relief’. However, the CGT position regarding non-business assets has also changed significantly from that date.
At the moment, CGT is payable on gains exceeding the annual ‘CGT-free allowance’ (currently £9,200) in any year. Since 6 April 2008 CGT has been payable at a flat rate of 18 per cent.
However, one big change is that CGT ‘indexation relief’ has been abolished completely. This will greatly increase chargeable gains on assets which were acquired many years ago. Previously, indexation relief acted to remove the effect of inflation from the date of acquisition (or 31 March 1982 if the asset was acquired prior to that date) to the date of disposal of the asset by applying an uplift to the notional cost. Although indexation relief stopped when taper relief was introduced, the indexation relief up to April 1998 (when the Retail Price Index was 162.6) was preserved, which significantly reduced the chargeable gains.
If you have assets, the disposal of which would trigger CGT, you should give consideration to your tax position. Assets in this category would include stocks and shares, second homes and so on. Your principal private residence continues to be exempt from CGT.
At the moment, CGT is payable on gains exceeding the annual ‘CGT-free allowance’ (currently £9,200) in any year. Since 6 April 2008 CGT has been payable at a flat rate of 18 per cent.
However, one big change is that CGT ‘indexation relief’ has been abolished completely. This will greatly increase chargeable gains on assets which were acquired many years ago. Previously, indexation relief acted to remove the effect of inflation from the date of acquisition (or 31 March 1982 if the asset was acquired prior to that date) to the date of disposal of the asset by applying an uplift to the notional cost. Although indexation relief stopped when taper relief was introduced, the indexation relief up to April 1998 (when the Retail Price Index was 162.6) was preserved, which significantly reduced the chargeable gains.
If you have assets, the disposal of which would trigger CGT, you should give consideration to your tax position. Assets in this category would include stocks and shares, second homes and so on. Your principal private residence continues to be exempt from CGT.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
