Increase in rate of Capital Gains Tax: example
The trustees’ section 2(2) amount for 2012-13 is £40,000. They make no capital payments until 2014-15 when a capital payment of £50,000 is matched against the earlier year’s section 2(2) amount giving the beneficiary a TCGA/S87 gain of £40,000 in 2014-15.
The beneficiary is a higher rate Income Tax payer and therefore pays Capital Gains Tax at 28%. They have personal gains of £15,000. The annual exempt amount for 2014-15 is £11,000.
The annual exempt amount is set first against the section 87 gains reducing those gains to £29,000. The rate of Capital Gains Tax is increased by 10% for each of the two years after the year following the year in which the section 2(2) amount accrued to the trustees; ie the two years after 2012-13. The rate of Capital Gains Tax on the s87 gains is increased by 2 x 2.8% to 33.6%.
The total Capital Gains Tax payable in 2014-15 is:
£15,000 @ 28% = £4,200
£29,000 @ 33.6% = £9,744