In a surprise but welcome announcement, the Chancellor increased the lifetime limit for entrepreneurs’ relief from £5 million to £10 million with effect from 6 April 2011.
As a result, an individual who qualifies for the relief should only pay capital gains tax (CGT) at a rate of 10% on the first £10 million of qualifying gains arising in their lifetime.
With the current maximum rate of CGT standing at 28%, this relief is now fairly significant, potentially saving an individual £1.8 million in CGT. Compare this to just over 12 months ago when the maximum tax saving achievable was only £80,000 (the maximum rate of CGT was 18% and the lifetime limit was £1 million).
As this relief primarily applies to gains on the sale of businesses and certain business assets, it is vital that you plan your business affairs well in advance to ensure you qualify, as this is by no means automatic, and to maximise any benefits for which you may qualify.
If you are interested in looking into this matter further please give me a call.
Sue Stephens
Tax Manager
