Coalition agreement: tax implications for individuals

The Conservatives and Liberal Democrats have published a summary of the points on which they have reached agreement in their coalition negotiations.  A final Coalition Agreement will be published shortly, followed by an emergency Budget within 50 days of signing the final agreement.

 

The points agreed so far include:-

       

The Conservatives’ plan to increase the Inheritance Tax threshold to £1million per individual has been shelved.  Instead, the threshold is to remain at its current level of £325,000 per individual, or £650,000 for married couples or civil partners who leave their estate to each other. 

 

The Liberal Democrats’ proposal of a “mansion tax” on properties worth over £2 million has also been shelved.

 

Capital Gains Tax looks set to rise to “rates similar to those applied to income”.  Commentators envisage that the emergency Budget will increase Capital Gains Tax from its current rate of 18% to 40%.  The new rate will only apply to non-business assets, and there are likely to be reliefs available for entrepreneurial business activities.  Those who own second homes, including buy-to-let properties, are the main target of the tax increase.  It is not clear whether the new tax rate will apply immediately, or even retrospectively.

 

There will be an increase in personal allowances for income tax from April 2011, with the long term objective of increasing the allowance to £10,000. 

 

If you would like advice on inheritance tax or capital gains tax, please contact:-