Capital taxes

• Capital gains tax (CGT) annual exemption
• Entrepreneurs' relief
• Inheritance tax - nil rate band
• Inheritance tax - reduced rate

Capital gains tax (CGT) annual exemption

The CGT annual exemption will increase in line with statutory indexation to £10,600 with effect from 6 April 2011.

For future years the annual exemption will be increased in line with rises in the CPI rather than in the RPI. Parliament will still be entitled to override automatic indexation and set a different figure.

Entrepreneurs' relief

With effect from 6 April 2011, the lifetime limit on gains qualifying for capital gains tax entrepreneurs' relief is increased from £5 million to £10 million. Qualifying gains are taxed at a rate of 10 per cent rather than at 18 or 28 per cent. There are no other changes to the rules or conditions relating to entrepreneurs' relief and the change is not retrospective.

Inheritance tax - nil rate band

No changes were made to the nil rate band which remains at £325,000.

Inheritance tax - reduced rate

The Government has announced that a reduced rate of inheritance tax will apply where 10 per cent or more of a deceased person's net estate (after deducting IHT exemptions, other reliefs and the nil rate band) is left to charity.

The tax rate of 40 per cent will be reduced to 36 per cent where death occurs on or after 6 April 2012 and a qualifying gift to charity is made. A consultation document will be issued in the summer.