Capital Taxes

Inheritance tax (IHT) nil rate band

The nil rate band for 2010/11 will be frozen at the current level of £325,000.

IHT avoidance

Legislation, effective from 9 December 2009, will be introduced in Finance Bill 2010 to counter two tax avoidance schemes that have been designed to avoid IHT charges on property in trusts. The measures will have effect for:

• transfers into a trust where the settlor retains a future interest, or where a future interest in a trust is purchased, on or after 9 December 2009 
• interests purchased in trusts on or after 9 December 2009.

Capital gains tax (CGT) and principal private residence relief (PPR)

PPR is not available on any part of a house which is used exclusively for the purposes of a business or vocation. On disposing of the house the appropriate proportion of the gain relating to the part occupied as the only or main residence is eligible for PPR.

Where a person cares for an adult under a local authority placement scheme, their contract with the local authority may require them to set aside one or more rooms exclusively for the use of the adult in care. In such a case, PPR may not be available on that part of the property. Finance Bill 2010 will remove this possible restriction.

The measure will have effect for disposals on or after 9 December 2009.