Budget 2018 Personal Tax – Capital Gains

The major change for capital gains tax comes in via the Entrepreneur’s Relief. Leading up to the Autumn Budget there were concerns it could be slashed or abolished, luckily neither happened with the chancellor instead announcing new qualifying conditions and the holding period increasing to 2 years. The Annual Exemption will rise to £12,000 with alterations made to Principle Private Residents Relief and Stamp Duty Land Tax.

1)      The Annual Exemption will rise from £11,700 up to £12,000

2)      Entrepreneurs’ Relief (ER) has received a revamp to the qualifying conditions from disposals made from 29 October 2019. Along with individuals having to own 5% of the voting right, they will now also be beneficially entitled to 5% of both the distributable profits and the company’s assets in a winding up of the company.

The qualifying period has also been doubled from 12 months to 24 months prior to the disposal.

Draft legislation has also been published which will entitle individuals who cease to qualify, due to no longer fulfilling the 5% requirements, to make a claim for ER up to the date they ceased qualifying. The election can only be made in cases where the individual’s interest has been diluted below the threshold due to new shares issued in the company consisting wholly of consideration in cash.

3)      From April 2020 letting relief for Private Residence Relief will be restricted to shared tenancy as opposed to whole house rents.

The final period of ownership exemption will be reduced from the current 18 months to 9 months from April 2020.

4)      The exemption of Stamp Duty Land Tax (SDLT) up to £300,000 has be extended to shared ownership properties on those valued up to £500,000. The change will take place immediately.

The filing deadline for SDLT returns and the payment of SDLT will be reduced from 30 days to 14 days after the effective date of the transaction for sales completed on and after from 1 March 2019.

5)      From April 2019 non-residents holding interest in any UK land (not just UK residential land) will be chargeable to Non-Resident Capital Gains Tax (NRCGT).

The extension will also relate to “UK property rich” entities, where 75% of the gross market value derives from UK real estate.  A charge will arise to an individual who has held an interest of more the 25% in the entity within the 2 years prior to the disposal.

An exemption is available where all of the UK property has been used for trading purposes and will continue to the course of action following the disposal.