The new UK coalition government’s tax policy will bring changes to UK tax.

An emergency budget will take place on 22 June 2010 and one of the major proposed changes relates to UK Capital Gains Tax (CGT).

It seems likely that capital gains on ‘non-business’ assets will be taxed at similar levels to higher income tax rates rather than the current rate of 18%.

For example, the capital gain on the sale of an investment property could be taxed at rates of up to 40% or 50%, depending on the taxpayer’s marginal income tax rate.

The policy document states that there will still be "generous exemptions for entrepreneurial business activities", so assets should be reviewed to ensure that they will qualify as ‘business assets’ once the legislation is published.

The CGT changes will need to be further considered once the detailed proposals are announced.

Action on CGT changes

It is currently not known when the proposals will be introduced and it is possible the increase could apply from the budget day or, although unlikely, 6 April 2010.

Vendors of non-business assets might wish to consider crystallising disposals sooner rather than later to third parties, life bonds or by disposals to trusts.

Alternatively, taxpayers could consider leaving the UK and becoming non-UK resident.

Further UK tax proposals

Other matters agreed by the new coalition government include:

• tackling tax avoidance is essential and is a top priority
• confirmation of the abolishing of rules requiring individuals to take a compulsory annuity at age 75
• taxation of non-UK domiciles to be reviewed
• corporate tax rates to be reduced, to "create the most competitive corporate tax regime in the G20" by simplifying reliefs and allowances, and by further reform of the Controlled Foreign Companies rules
• UK Inheritance Tax reform is not a priority.
  

Professional tax advice should be obtained before any action or transaction is undertaken. We will be happy to assist with this.

Please contact us for more information.

Please note: the above information is intended for general guidance only and any reader should not act upon it without taking tax advice in relation to their specific circumstances.