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Capital Gains Tax Climbdown
Alistair Darling yesterday announced a partial climbdown on the capital gains tax proposals which were announced last October.
When released the suggested reform looked great at first glance, but on subsequent examination it became widely criticised. The basics of the reform centered around a cut in capital gains tax from 40% (for higher rate taxpayers) to a flat rate of 18%.
The problem however was that taxpayers currently benefit from a form of tax reduction called taper relief. This is where, after a certain length of time holding an asset, the amount of capital gains tax you pay decreases. The plan was to abolish this relief.
To prevent the entire reform being rejected, it appears that the government has done a slight u-turn and has announced a new form of tapering, called "entrepreneur's relief".
This rule will apply to anyone who owns at least a 5% stake in a trading business, where they are a company director, an employee or some other officer of the company. In these cases, the tax rate payable will be 10%. This unfortunately isn't the end of the story. The 10% is only payable on the first £1m of capital gains in your lifetime. After this you will be taxed at the standard rate of 18% for the rest of your life.
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capital gains, tax, rate, cut, advice, inheritance, cgt, losses, pay, money, returns, long-term, guide, income, property.
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