But what is Capital Gains Tax (CGT)?
Capital Gains Tax is tax on the profit when you sell an asset thats increased in value, such as a property. It’s the gain you make on the assets that is taxed not the money you receive.
The basic rate of capital gains tax will fall from 18% to 10% from April this year, while the higher rate will fall from 28% to 20%.
For a £10,000 gain (above the £11,100 tax-free allowance) a basic-rate taxpayer would currently be left with £8,200 after tax, and a higher-rate or additional-rate taxpayer with £7,200.
Under the new rates, the basic-rate taxpayer would be left with £9,000 and the higher or additional-rate taxpayer with £8,000.
The changes will see Britain charge some of the lowest capital gains tax rates in Europe.
However, any capital gains made on residential property will not be eligible for the newly lowered rates. The Chancellor has maintained the existing rates, equivalent to an 8% point surcharge.
The Budget states the move was intended to “ensure that CGT provides an incentive to invest in companies over property”.
It seems the Chancellors plan to reduce capital gains tax rates are a welcoming encouragement to those investing in business – but yet another disappointment for those invested in residential property who will fail to benefit from this latest initiative.
For further information on how this affects you as an investor, drop us an email at email@example.com