George Osborne, the Chancellor, cut capital gains tax significantly, giving many investors a major boost.
The basic rate of capital gains tax will fall from 18pc to 10pc from April this year, while the higher rate will fall from 28pc to 20pc.
However, gains made on residential property will not be eligible for the newly lowered rates. Instead the Chancellor has maintained the existing rates, equivalent to an eight percentage point surcharge. The same will apply to carried interest.
The Budget document said the move was intended to “ensure that CGT provides an incentive to invest in companies over property”.For a £10,000 gain (above the £11,100 tax-free allowance) a basic-rate taxpayer would currently be left with £8,200 after tax, and a higher-rate or additional-rate taxpayer with £7,200.
Under the new rates, the basic-rate taxpayer would be left with £9,000 and the higher or additional-rate taxpayer with £8,000.
The changes will see Britain charge some of the lowest capital gains tax rates in Europe.
Tina Riches, a tax partner at Smith & Williamson, the accountancy firm, said: “The Chancellor’s plan to reduce capital gains tax rates are a very welcome encouragement for entrepreneurs and others investing in businesses – but yet another disappointment for those invested in residential property who fail to benefit from this latest initiative.”
Ms Riches added that taxpayers likely to be hit by the new dividend taxation system, which takes effect next month, might "reconsider their portfolios” in light of the lower rates of CGT. A change in focus from income-producing to growth-orientated shares, for example, could mean paying less tax.
Entrepreneurs' relief will also be extended to long-term investors in unlisted companies. This will mean that the rate for gains on newly issued shares in unlisted companies (purchased on or after March 17 2016) will be 10pc, as long as they are held for a minimum of three years.