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The Budget 2016: Capital gains tax cut to 20 per cent to boost businesses

3 min read

16 March 2016

Former editor

In an effort to get people investing in their business and create jobs, chancellor George Osborne used his 2016 Budget speech to unveil a reduction in Capital Gains Tax from 28 per cent to 20 per cent.

The Budget 2016: A 500-word summary for entrepreneurs and SME business owners

Reflecting on the fact that British Capital Gains Tax is one of the highest in the world, Osborne made the change amongst a raft of other pro-business policies.

“The best way to encourage that is to let them keep more of the rewards when that investment is successful,” he said to the House of Commons.

Alongside a cut to the headline rate of Capital Gains Tax, a reduction in the basic rate was also made. It will fall from 18 per cent to ten per cent.

Capital Gains Tax is a tax on the profit when an individual sells or disposes of an asset that has grown in value. Officially, it is the gain someone makes that’s taxed, not the amount of money received.

The changes will be introduced in three weeks, but the old rates will stay in place for gains on residential property and carried interest.

“I am also introducing a brand new ten per cent rate on long term external investment in unlisted companies, up to a separate maximum of £10m of lifetime gains,” Osborne went on to say.

“In this Budget we’re putting rocket boosters on the backs of enterprise and productive investment.”

Read more on he Budget 2016:

Meanwhile, Entrepreneurs’ Relief has been extended to external investors in unlisted trading companies.

Alex Macpherson, head of Octopus Ventures, commented: “It is an exciting time for British high growth small businesses – we have great people, a supportive community, access to funding and plenty of innovative ideas, making this an incredibly fertile place to grow outstanding businesses.

“With this in mind, UK entrepreneurs will welcome the chancellor recognising this ambition and entrepreneurial appetite, rewarding those who choose to sell their business by cutting Capital Gains Tax and extending Entrepreneurs’ Relief. Already in 2016, we have seen two Octopus portfolio business exits, with Microsoft buying SwiftKey, and Essilor purchasing Vision Direct. We are witnessing exciting developments in the UK’s entrepreneurial market and it’s great to see this government recognising this.”

The Budget 2016: Full transcript of chancellor George Osborne's speech