Get in Touch Menu

Impact of Emergency Budget on matters affecting private client tax

25 June 2010

The Emergency Budget presented by the Chancellor on 22 June was less dramatic than many commentators had expected in terms of matters affecting private client tax. A Willans Partner comments on the main changes.


Inheritance tax

The Inheritance Tax threshold is going to stick at £325k until 2015 – so much for the £1m threshold advocated not that long ago by the Conservatives!  Leaving exemptions unchanged was something the Conservatives before taking power referred to as a ‘stealth tax’. Something Mr Osborne has not changed (which will gladden HMRC’s heart) is the plan to extend anti-avoidance measures to Inheritance Tax schemes but we have yet to see the details.

Capital Gains Tax

The Capital Gains Tax annual exemption is also remaining the same, at £10,100 for individuals – another stealth tax. A big change was expected in the Capital Gains Tax rate but in the event Mr Osborne went for something more politically acceptable: with effect from 23 June the basic rate of CGT remains 18% but if the gain, when added to the taxpayer’s income in that year, exceeds the basic rate income tax band, CGT is charged at 28%. This remains pretty reasonable in the circumstances but unfortunately the door remains closed to the re-introduction of taper relief or indexation so unlucky taxpayers could still find themselves paying CGT on a gain which they have not really made if it is due simply to inflation.

Entrepreneurs’ relief

The lifetime limit for entrepreneurs’ relief, which the former Chancellor had increased to £2m, has been increased with effect from 23 June to £5m – good news for those able to take advantage of it.


The CGT annual exemption for trusts remains £5,050 and trustees (and executors) also face the new 28% CGT rate.

Unsurprisingly the Income Tax rate on trusts stays at 50% (42.5% for dividends). Politically it would have been unacceptable to improve this given the (misguided) perception that trusts are all about tax avoidance. As more enlightened thinkers know, reliable studies have shown the majority of trusts are created for sensible asset protection purposes.


A welcome reversal of the policy announced by the former Chancellor in March is the continuing ability to treat furnished holiday lets as a trade for income tax purposes. This appears to be subject to some new details which will need to be looked at carefully.

For those buyers acquiring big ticket properties the Stamp Duty Land Tax rate is increasing from 6 April 2011 to 5% on properties worth over £1m.


Many people have been postponing tax planning pending the outcome of the election and then the Budget. Given the freezing of the Inheritance Tax allowance for many years to come it must be a good idea to reconsider now making suitable gifts, perhaps using trusts, to mitigate the impact of this stealth tax.


If you need clear and pragmatic legal advice, we’re here to help so please get in touch.

Contact us

Disclaimer: All legal information is correct at the time of publication but please be aware that laws may change over time. This article contains general legal information but should not be relied upon as legal advice. Please seek professional legal advice about your specific situation - contact us; we’d be delighted to help.
Simon Cook LLB (Hons), TEP
View profile
Simon Cook
Related services
Share this article
Resources to help

Related articles

Paws for thought: what happens when I can’t care for my pets anymore?

Wills, trusts & probate

Have you ever wondered what preparation can be done to ensure your pets are looked after properly further down the line? Our wills, trusts & probate experts offer some useful…

Leah Vincent LLB (Hons), LLM, TEP

Supporting Cobalt's Make a Will month for the eleventh year

Wills, trusts & probate

Throughout April, our wills, trusts & probate team is donating their expertise to support local medical charity Cobalt’s Make a Will month. 2024 marks the eleventh year of our support…


Gifting: how to minimise inheritance tax

Wills, trusts & probate

How can you minimise the amount of inheritance tax when you’re looking to pass things on to other people? Our wills, trusts & probate experts look into how gifting can…

Ashley Wood LLB (Hons), LLM
Contact us