Taper Relief Information

Taper relief is relief afforded an individual after a chargeable gain has been deducted of any available allowable losses, and the chargeable gain yet remains higher than the exemption threshold. This form of relief is applied after all other applicable deductions have been made and is with specific regards to how long the asset has been held and whether it was a business or non-business asset.

In this instance, it would seem that parliament is extending some fairness to the incidence of this tax, which with particular regard to capital tax gains seems to specifically target the UK providers of capital. For many of these individuals, capital gains tax is a sensitive issue, and while a source of public funding is needed, if applied in a rudimentary and inflexible fashion it is quite able to discourage investment and commerce, with the inevitable result that the economy is adversely affected.

With specific regards to business assets, this taper relief is not applicable if the asset is held for less than one year, however if held for one year, only 50% of the chargeable gain is taxable, and if held for two or more years, only 25% of the chargeable gain is taxable.

In the case of non-business assets, for holding periods of up to 2 years, the taper relief is ineffective, but for 3 years 95% of the chargeable gain is taxable, and this scales down in increments of 5% to provide a minimum chargeable amount of 60% being taxable if this non-business asset is held for 10 years or more. For further information on how this tax may affect your finances, please click here.

As attractive as this relief may seem, there are some chargeable gains that do not qualify for taper relief. These include royalties, cash from mutual funds and capital sums from trusts in the capacity of a beneficiary.

If a chargeable gain is held over to a future period by deferral, then the taper relief that is applied is in relation to the original period that the asset was held until it was disposed. It does not operate cumulatively and until the chargeable gain is finally realized. However, if an asset is received from a spouse, the qualifying period is deemed to begin when the assets was first acquired by the granting spouse, and so affords lengthier holding periods in order to increase the taper relief available.

Interestingly, at times, steps can be taken to insulate an asset from movements in its market value. While this is usually found only in the area of share trading where the listed company is deregistered or the trading of shares is frozen, if for an extended period of time, the taper relief usually applicable will be denied. If this could cause you personal financial worry, this website may be able to provide you with useful information.

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