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From 6 April 2016, CGT rates have fallen from 18% to 10% for gains taxed at the basic rate and from 28% to 20% for higher rate gains. The tax rate will also reduce to 20% for chargeable gains of trustees and personal representatives. The new lower rates apply to most chargeable gains including shares and other financial assets but does not include gains which arise on residential properties. So, the availability of the CGT exemption for the main residence becomes even more important.
The amount of the chargeable gain is after the deduction of reliefs, losses and the annual exempt amount which is £11,000 for 2016/17.
The rate of CGT payable on gains depends on the level of the individual's taxable income and gains for the tax year. Where part of an individual's income tax basic rate band is unused and they have gains from residential properties, they can use the unused basic rate band in the most beneficial way to reduce their CGT charge. The individual can chose which chargeable gains are taxed at the lower rate of CGT, up to the unused amount. For these purposes, the unused amount is reduced by the amount of any gains that are taxed at the 10% rate under Entrepreneurs' Relief or Investors' Relief.
Investors' Relief was introduced for unlisted trading company shares issued to individuals on or after 17 March 2016 where the individual has no connection with the company. This new relief applies a 10% rate of tax to gains accruing the subsequent disposal of these shares as long as they have been held for three years from 6 April 2016.
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Government borrowing fell to £7.8 billion in December 2023 giving Chancellor Jeremy Hunt more scope to make the tax cuts he has hinted at in the Spring Budget.
Tax cut promises may need to be scrapped as a result of the UK being in an 'unfortunate economic and fiscal bind', the Institute for Fiscal Studies (IFS) has warned.
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