Annual exemption and rate

The annual exemption for individuals is £10,100 for 2010/11 (unchanged from 2009/10). Trustees receive half this figure (£5,050, also unchanged), although this may be shared between trusts which have been set up by the same person.

There is no immediate change to the main rate of CGT, which remains 18%. Many commentators predict that the rate will increase in a future Budget: it is so much lower than the new highest income tax rate (50%) that it will encourage attempts to convert income into capital gains.

Entrepreneurs' Relief (ER)

ER reduces the amount chargeable to CGT on certain sales of business interests and business assets by individuals and some trusts. The effect of the relief has been to cut the rate of CGT from 18% to 10% on the first £1m of qualifying gains over the individual's lifetime. This lifetime limit is raised to £2m for disposals on or after 6 April 2010.

Where disposals have already exceeded the limit before that date, the excess will not qualify for the relief, but the individual will be able to claim ER on another £1m of gains realised in future.

Furnished Holiday Letting (FHL)

As announced last year, the tax advantages of FHL businesses will be withdrawn with effect from 6 April 2010. Income from FHL will be treated in the same way as income from other property rents. This means there will be less advantageous offset of losses and a number of CGT reliefs will no longer be available. However, it appears that Entrepreneurs' Relief will apply to disposals of a FHL property within 3 years of 5 April 2010, potentially reducing the effective rate of CGT on up to £2m of gains from 18% to 10%.