UK Chancellor George Osborne has announced a 10% increase in Capital Gains Tax (CGT) for higher rate taxpayers in his emergency budget.

Changes to the CGT rate will take place from midnight today.

The new 28% rate is significantly lower than the estimates of 40-50% campaigned for by the Liberal Democrats and mentioned in the coalition’s agreement, which said CGT would reach “rates similar or close to those applied to income.”

The lower  CGT rate of 18% still applies to basic rate taxpayers but income and gains are taken together to determine the tax rate that applies.

Only gains within the unused balance of the basic rate band will be subject to the 18% rate.

By raising CGT, the chancellor aims to bring in £1billion per year.
 
In his budget, he also increased VAT from 17.5% to 20% from 4 Jan 2011 as widely forecast and raised the income tax-free threshold by £1,000 to £7,475 for those on lower incomes.

There was good news for UK business, as Mr Osborne reduced the headline corporation tax rate by 1% a year for four years, to 24%.

The small companies’ tax rate will be reduced to 20% from 21% from April 2011.

For more information on the implications of the budget and how to minimise your CGT liabilities, please contact us.