For trustees and personal representatives of a deceased individual, the rate is increased to a flat 28% from 18% on all gains over the available annual exempt amount (AEA). This represents an increase of 55% to those impacted and is consistent with previous income tax increases to discretionary trusts introduced in the March budget by the previous government.

The rate of CGT for gains qualifying for entrepreneurs' relief remains at 10% but in a popular move the lifetime limit on gains qualifying for entrepreneurs' relief is increased from £2 million to £5 million for future gains.

The AEA remains at £10,100 for 2010/11. Where the use of this allowance saves tax at 18% a client will save £1,818 in tax but where it is available to be used to reduce gains at 28% it will be worth £2,828.

It is worth noting that gains arising before 23 June 2010 will continue to be liable to CGT at 18%. These will not be taken into account in determining the rate (or rates) at which gains of individuals arising on or after 23 June 2010 should be charged. In working out the CGT payable, taxpayers will also be able to deduct losses and the AEA to minimise their tax liability.
Below I have outlined a short example of a CGT planning consideration for a client realising gains at the old and new rates.

In 2010/11 Alan’s taxable income, after all allowable deductions and the personal allowance, is £27,400 (£10,000 less than the upper limit of the basic rate band of £37,400).

Alan sold an asset in May 2010 (before the change of rates on 23 June 2010) and realises a chargeable gain of £17,000. He is taxable at the old 18% rate but he is not sure if he should use his AEA against this gain. In November 2010 Alan sells another asset, realising a chargeable gain of £25,100. As it’s after 23 June 2010 he is potentially liable to 28% on all or some of the gain. Alan has no allowable losses to set against these gains, and the AEA for 2010/11 is £10,100. Neither of the gains qualifies for entrepreneurs' relief.

Alan decides to set the AEA against the later gain (because part of that gain is liable to tax at the higher CGT rate), leaving £15,000 taxable (£25,100 - £10,100).

The first £10,000 of the £15,000 is taxed at 18% as it falls below the upper limit of the basic rate band and the remaining £5,000 would fall above this threshold and would be taxed at 28%.

With a net relievable pension contribution of £4,000 (grossed up to £5,000) his basic-rate tax threshold would be extended to
£42,400 bringing the tax charge on the full capital gain down to 18% and generating a saving of £500 on that liability.