IT contractors and Capital Gains Tax (CGT)

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IT contractors and Capital Gains Tax (CGT)

Posted Jul 13, 2010

Following the Emergency Budget, many contractors will be aware that the higher CGT rate has risen to 28%, effective from 23rd June 2010. This is a lower rate than many feared prior to the Budget announcement, but still a significant increase on the previous 18% standard rate.

For the 2010-11 tax year, if you income (minus allowable reliefs and deductions), plus net chargeable gains are lower than the higher rate income tax threshold (£37,400), then you will pay capital gains at the previous 18% flat rate.

If your income (as above) breaches the higher rate income tax threshold, then a flat rate of 28% will apply to any gains (or the part of the gain that pushes you into the higher rate tax bracket).

If you are disposing of qualifying business assets following the 23rd June 2010 effective date, the terms of entrepreneurs' relief have improved as a result of the Budget.

The lifetime limit of claims under entrepreneurs' relief has increased from £2m to £5m. Although a technical change has been made to the way this relief is calculated, an effective 10% CGT rate will continue to apply to qualifying disposals.

As ever, if you have any questions about CGT, we recommend you talk to your accountant.

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