Good news for entrepreneurs

There was a sense of relief from Investors as the Capital Gains Tax (CGT) rate was increased to 28% from 18% for higher rate tax payers rather than the anticipated 40 or 50% (subtle PR ploy by Mr Osborne). However, this is still a significant hike and will be costly to Investors of non-business assets. The government has allowed no time for swift disposals or tax planning exercises as the rate change became effective as of midnight last night.

The lifetime allowance for Entrepreneurs Relief has increased significantly to £5 million from £2 million. This enables those meeting the conditions for Entrepreneurs Relief to benefit from a 10% rate of CGT, which now compares significantly favourably with the new CGT rate of 28%. If you are considering disposing of your business, please review with us carefully the conditions you need to meet to ensure you are eligible.

As advisors, it is unprecedented to have deal with not only three rates of CGT (10%, 18% and 28%), but also to deal with a changes mid way through the year. Careful attention to disposals dates will have to be given, reporting separately pre and post budget day gains.