The Autumn Budget 2018 Reaction: Capital Taxes

Below we set out a summary of the budget changes in relation to capital taxes

Annual Exemption

The Capital Gains Tax annual exempt amount will increase to £12,000 in April 2019 (from £11,700). The exemption will increase in line with the CPI from 2020/21.

Principal Private Residence Relief (‘PPR’)

An individual will generally not pay Capital Gains Tax on a property they have occupied as their main residence.  A final period exemption of 18 months has been available irrespective of whether they have occupied the property in that period or not.  This final period exemption will be reduced to 9 months with effect from April 2020. There will be no changes to the 36 months final period exemption available to disabled people or those in a care home.

In addition, if an individual has lived in a property which they have let out, lettings relief has been available (subject to certain limits) to reduce the gain chargeable to Capital Gains Tax in the let period.  From April 2020, the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant.

Entrepreneurs Relief (‘ER’)

In order to qualify for ER, an individual must meet certain conditions for a period of time preceding the qualifying disposal. This has been increased to 24 months from 12 months with effect from 6 April 2019.

In order to qualify for ER in relation to a disposal of shares, the shares subject to the disposal must be entitled to at least 5% of the company’s distributable profits and net assets, as well as 5% of the voting rights.  This change is with effect from 29 October 2018.

Stamp Duty – First time buyers

It has been announced that first-time buyers’ relief in England and Northern Ireland has been extended such that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay Stamp Duty Land Tax on the market value of the property. This change will apply to relevant transactions with an effective date on or after 29 October 2018. The relief will also be backdated to 22 November 2017 so that those eligible who have not previously claimed first-time buyers’ relief will be able to amend their return to claim a refund.