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Budget 2016: Top rate of capital gains tax slashed

Chancellor, George Osborne has this afternoon announced that the top rate of capital gains tax will fall significantly from 28 per cent to 20 per cent, effective in just three weeks’ time.

The basic rate will also be falling from 18 per cent to just 10 per cent – also in the next three weeks.

Mr Osborne stated in the House of Commons that the British capital gains tax system was one of the highest in the developed world, “when we want our taxes to be among the lowest”.

The Chancellor did however confirm that the old rates would remain for gains on residential property and carried interest.

“I am also introducing a brand new 10 per cent rate on long-term external investment in unlisted companies, up to a separate maximum of £10m of lifetime gains,” said Osborne.

Documents from HM Treasury confirmed that capital gains rates would be changed from 6th April 2016, with an additional eight percentage point surcharge to be paid on residential property and carried interest i.e. the share of profits or gains paid to asset managers.

What is capital gains tax?

Capital gains tax is a tax on the profit people make when they sell something that has risen in value; paid at a basic or higher rate depending on the rate of income tax paid.

Jo Nockels, senior training and communications manager, TaxAssist Accountants, said: "At last we have a Budget which has some measures to back small business and supports the enterprise and hard work of this vital sector.

“They are facing new responsibilities and pressures, including workplace pension schemes, the national living wage, dividend taxation changes and quarterly tax reporting. 

"There are over five million small businesses in the UK, contributing a massive £1.8 trillion to our economy and providing some 15.6 million jobs. They deserve some positive news for a change."

For a full summary of this afternoon's Budget 2016 and the highlights that relate to the UK's small business community click here.

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