The measure
The Government has announced an increase in the lifetime limit on gains qualifying for entrepreneurs' relief. The current limit of £5 million will be increased to £10 million. All gains that qualify for Entrepreneurs' Relief up to this lifetime limit will be subject to a reduced rate of capital gains tax of 10%. Any gains in excess of this lifetime limit will be subject to the standard rate of capital gains tax of 28%. This relief results in an effective saving of £1,800,000, an increase of £900,000 from the current amount of relief available. In line with the current rules, a number of conditions need to be met in order to qualify for this relief. These conditions remain unchanged by the Budget announcement.
Who will be affected?
Individuals and certain trustees making qualifying gains in qualifying companies will benefit from the increased lifetime limit.
When?
The increased lifetime limit will take effect from 6 April 2011. Any qualifying gains up to £10 million arising on or after 6 April 2011 will benefit from the 10% rate of capital gains tax. The current limit of £5 million applies until 5 April 2011 and any gains in excess of this limit will not qualify for this additional relief but will be subject to the normal rate of capital gains tax at 28%.
Our view
This is the third successive increase to the lifetime limit in as many years and seemingly demonstrates the Government's commitment to encouraging entrepreneurs to invest and reinvest in the UK.
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