CAPITAL GAINS TAX: RATES AND ANNUAL EXEMPT AMOUNT

Around 100,000 capital gains taxpayers will pay less tax and the tax
calculation will be made much simpler for many, announced the
Chancellor today.

Capital gains in excess of the annual exempt amount will be charged
at 20% or 40% in line with savings income

The annual exempt amount will be increased in line with inflation .
For the tax year 1999-2000, an individual will be exempt from capital
gains tax on the first #7,100 of gains. Most trusts will be exempt on
the first #3,550 of gains.

DETAILS

New charging structure for CGT rates

1. Capital gains are treated as the top slice of income. At present
they are taxed at the appropriate income tax rates of 20%, 23% or
40%, depending on the level of total income and gains

2. Savings income is currently taxed at 20% or 40% and there are
complex rules that govern the interaction between capital gains and
savings income to determine the rate of capital gains tax payable.

3. From 1999-2000 capital gains tax rates will be aligned with those
for savings income so that gains are charged at 20% where the gains
when added to total income are below the basic rate limit and 40%
where they exceed that limit. This will considerably simplify the
rules for calculating the tax liability for many capital gains
taxpayers under self assessment. The complex rules for those with
savings income and gains will no longer be needed.

4. About half of all individuals who pay CGT have some liability at
the basic rate and they will benefit from a reduction in the tax they
have to pay. The estimated cost of this measure is expected to be
negligible in 1999-2000, #10 million in 2000- 2001 and #15 million in
2001-2002.

Annual exempt amount

5. An individual whose total net gains in a tax year do not exceed
the annual exempt amount is not liable to capital gains tax. Under
the Chancellor's proposal, the exempt amount will rise from #6,800 to
#7,100 for the tax year 1999-2000.

6. Husbands and wives are each entitled to their own separate
exemption.

7. An exemption of #7,100 will also be available to the trustees of a
trust for a mentally disabled person or for a person receiving
attendance allowance or the middle or higher rate of disability
living allowance. For trustees of other settlements the exempt amount
will be #3,550.

8. An exemption of #7,100 will be available to the personal
representatives of the estate of a deceased person for gains accruing
to them in the year of death and the two following years of
assessment.

9. The exemptions are automatically increased each year in line with
the Retail Prices Index unless Parliament determines otherwise. The
Chancellor's proposals will increase the exemptions in line with this
statutory indexation based on the increase in the Retail Prices Index
of 3.2 per cent in the year to September 1998, rounded up to the next
multiple of #100.

INLAND REVENUE PRESS OFFICE
Media enquires to: 0171 438 6692/6706/7327
(Out of hours: 0860 359544)
Non-media enquiries to: 0171 438 6420/6425

Inland Revenue information is on the Internet:
www.inlandrevenue.gov.uk

# = pounds sterling

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