Capital Gains Tax: Annual Exempt Amount for 2012/13 £10,600 (subject to Finance Bill 2012 receiving Royal Assent), not £11,200
There has been some confusion over the expected Capital Gains Tax Annual Exempt Amount (AEA) for 2012/13. For those members who are understandably confused by the two amounts being bandied around, here is the answer, which is all down to the necessary Parliamentary process.
In 2011, it was announced that the AEA for 2012-13 would be kept at the same level as for 2011-12 ie £10,600. In addition, in line with the Government’s decision to move the underlying indexation assumption for all direct taxes to the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI), it was announced that the AEA will rise in line with CPI from 2013-14.
Legislation is included in the Finance Bill 2012 to effect these changes (see clause 34). Table B of the Overview of Tax Legislation and Rates (issued on 21 March 2012) reflects the proposed change in the Finance Bill and therefore shows the AEA for 2012/13 as £10,600.
However, under the existing legislation, TCGA 1992 section 3(4), HM Treasury is required to issue an order before each tax year setting out the AEA for that year. Accordingly HM Treasury made an order on 20 March 2012 setting out the AEA for 2012-13 - see SI 881/2012 The Capital Gains Tax (Annual Exempt Amount) Order 2012 http://www.legislation.gov.uk/uksi/2012/881/introduction/made. Under current legislation the AEA is arrived at by increasing the AEA for 2011-12 in line with inflation as measured by RPI. Therefore the Order states that the exempt amount for 2012/13 is £11,200, unless Parliament otherwise determines.
The content of the Order will be superseded by the proposed legislative changes in the Finance Bill once the Bill receives Royal Assent, effectively leaving the AEA as £10,600.
Technical Team
2 April 2012
