UK Government Pre Budget Speech

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The main items in the Chancellor's speech that effects the ownership of stocks and shares is the change in Capital Gains Tax (CH+GT) and, to a lesser extent the changes in Inheritance Tax (IHT).
N.B. This is not an in-depth analysis of the PBS but a simple article just to show what will change and how the changes may affect you.

CGT

As from 6th April 2008 CGT will be charged at a single rate of 18%. CGT is currently charged at your highest rate of income tax but can be reduced in various ways depending on the asset being disposed. These are called taper relief and accelerated taper relief.
Presently business assets (which include family businesses and AIM/Plusmarket shares) are taxed at 20% after being held for one year and 10% if held for two years. In future disposals of these assets will attract the universal rate of 18% of the profit.
Second properties and buy to let , currently taxed at 40% again will be taxed at 18%. Main market stocks and shares which are currently taxed at 40% reducing to 24% over ten years will also have a flat rate of 18%. Note that the CGT allowance of £9200 is not being removed and, presumably, will be increased next year.

IHT

The current IHT allowance of £300,000 will remain the same but married couples will jointly be entitled to the allowance and on death will be able to be passed on to the surviving spouse, making their allowance £600,000. This is retrospective so will apply even when one spouse died a number of years ago. This is, of course, assuming that the deceased spouse did not use any of his/her allowance. As assets passing between spouses is exempt from IHT, if this allowance was not used it was lost. This will not be the case after April 2008.

This also applies to civil partnerships but not unmarried couples living as a couple or siblings sharing a house for financial reasons.

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