Capital Taxes

Stamp duty land tax

A number of changes to stamp duty land tax (SDLT) were announced, including:

• Where connected parties exchange property, the values of the two properties will not be ‘linked’ for determining the rate of tax from the date of Royal Assent.
• Payment of SDLT will no longer have to accompany the SDLT return from Royal Assent.
• There will be an exemption from SDLT for purchases of new zero-carbon homes valued at up to £500,000. For purchase prices above that level, a £15,000 reduction to the normal SDLT liability will apply from 1 October 2007.

Pre-owned assets tax – late elections

From 21 March 2007, HMRC will be allowed to accept, after the normal deadline, an election for assets to be treated as part of an estate for inheritance tax purposes rather than to be subject to pre-owned assets tax. The change may also apply to elections for 2005/06 that were late.

Capital gains tax

The capital gains tax annual exemption for 2007/08 will be £9,200 for individuals and a maximum of £4,600 for most trusts. The Finance Bill will contain anti-avoidance legislation, effective from 6 December 2006, aimed at certain capital loss based avoidance schemes.

Inheritance tax

The inheritance tax nil rate band will increase to £300,000 for 2007/08. It will then rise each year to reach £350,000 in 2010/11.

Tax Tip Make a will. If you die without making a will, your assets will be divided between your relatives according to the intestacy rules after inheritance tax is paid at 40% on any value above £300,000 that goes to relatives other than a spouse or civil partner. If you have no surviving relatives, the same tax will be paid, but the Crown (ie the government) will claim the balance. To avoid this, if you have no relatives, make a will leaving your estate to the charities of your choice. Anything left to charity is free of inheritance tax.

Recognition of stock exchanges

HMRC will be able to designate as a recognised stock exchange for tax purposes any investment exchange designated as a recognised investment exchange (RIE) by the Financial Services Authority (FSA). The move will ensure equal tax treatment for FSA-listed shares, regardless of which RIE is used as the primary market for the shares. The measure will take effect from Royal Assent.