Year End Tax Review 2010/2011


Lead articles

Looking forward

This year, next year

Rate of change

Pension merry-go-round


Too much NIC

NIC and pensions

Company cars

Tax-free benefits

Childcare vouchers

Business - General

Time to incorporate?

Associated or not?

His and hers

Family bonus

Profit and loss

Show me the money

Can't pay, won't pay?

Turning back the clock

Business - VAT

Standard VAT or flat VAT?

VAT's up again

All Europeans now

A good start for VAT

Happy returns?


Top-up savings

Rainy day money

Capital Gains

Gains favoured

Splitting gains

A place in the country

Holiday lets reprieved


Family fortunes

Where there's a Will

Credits and debits

Benefit going

Piggy banks

Still trustworthy?


Penalty shoot-out

Going online

Paperwork, paperwork

Pay tax later

Opportunity knocks again


Give and save

Non-Domiciled People

Home and away


Interesting times

Gains favoured

The recession may have turned CGT into a problem many people wish they had, but there are still lucky people sitting on unrealised gains that are exposed to tax at 18% or 28%. If the economy recovers - as we hope it will - investments bought now may be showing big gains in a few years.

A lower rate of 10% is available to people who dispose of their own businesses - there's a limit of £5m of gains over your lifetime. The conditions for this "Entrepreneurs' Relief" are complicated and it's worth checking that you are entitled to it if you are hoping to benefit. Don't sell up in the expectation of 10% and be disappointed to find the tax is nearly two or three times as much.

Mr Osborne raised the CGT rate for higher-rate income tax payers on 22 June 2010. It used to be clear that gains were more favourably taxed in every case: now the picture is more confused. A basic rate tax payer suffers 18% on gains and 20% on income (plus, perhaps, high levels of NIC). A 40% taxpayer suffers only 28% on gains, but the higher rate of tax on net dividend income is effectively only 25% (with no NIC), making gains slightly worse than dividends. A 50% taxpayer has a clear preference for gains a 22% differential in the headline rate (with possible further NIC on income), and an effective rate on a net dividend of 36.1%.

In spite of the attempt to level the playing field, it is likely that many people will still arrange to have their investment returns in the form of gains rather than income. HM Revenue & Customs are aware of this - there was a similar difference before 1988, and they will be dusting off old rules that let them charge people at income tax rates on what the taxpayers think are gains. If you are hoping to take advantage of the lower CGT rate, it's worth being sure that none of these anti-avoidance provisions can be applied to you.

Action Point!
Do you know how much CGT you might pay on your assets?