What is taper relief?

Taper relief is a tax relief that is applicable when inheritance tax is due on a gift that is made within 7 years prior to the donor’s death.

What replaced taper relief?

The new flat rate system will replace the taper relief regime introduced by Gordon Brown in 1998. From next April, we will no longer be concerned with how long an asset has been held or whether it qualifies under the rather tortuous ‘business asset’ rules – the flat rate of 18% will apply to everything.

When was taper relief abolished?

April 2008 Quick Reference The maximum reduction available was 40% for a non-business asset and 75% for a business asset. Taper relief was introduced in April 1998 but abolished from April 2008, largely because of disquiet at the extent to which private equity firms were using it to avoid paying tax on their profits.

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How much is taper relief?

The 7 year rule If there’s Inheritance Tax to pay, it’s charged at 40% on gifts given in the 3 years before you die. Gifts made 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.

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Does taper relief still apply?

Capital Gains Tax Taper Relief was able to save you many thousands of pounds in tax. Unfortunately this relief no longer exists but there are lots of other strategies you can use to reduce your CGT when you sell property, a business, shares or other assets.

Is taper relief still available?

How does taper relief work?

Key Facts

1. Taper relief reduces the tax on lifetime gifts if the donor survives at least 3 years.
2. 2.It works on a sliding scale from years 3 to 7.
3. There is usually no Inheritance Tax on lifetime gifts after 7 years have elapsed.
4. But the relief only applies to the value of gifts over the Inheritance Tax nil rate band.

In April 2008 Taper Relief was replaced by Entrepreneurs Relief. The Finance Act 2003 then extended the definition of a business asset further again and came into effect on April 6th 2004.

How did taper relief affect capital gains tax?

Two years after Taper Relief was introduced the Finance Act 2000 extended the definition of a business asset, making the Capital Gains Tax rate applicable to even more taxpayers. The Finance Act 2002 then reduced the minimum holding period, making taper relief applicable on full business assets after just two years.

What was the purpose of taper relief in 2008?

Taper Relief was useful for the disposal of assets, particularly those with qualifying business use, and provided a valuable reduction on the amount of Capital Gains Tax payable.

When do you get taper relief on business assets?

The earliest date on which the 10 year qualifying holding period requirement is satisfied for maximum business asset taper relief is 5 April 2007. Edwards acquires a business asset in November 1998 and sells it in December 1999. The disposal qualifies for one year of taper relief, reducing any chargeable gain by 7.5% to 92.5%.

What are the new capital gains tax rules?

The abolition of taper relief means that the ability to benefit from an effective Capital Gains Tax rate of just 10% after owning qualifying business assets for just two years will disappear. Since 2004, most commercial property has qualified as a business asset for taper relief purposes.