Taper relief is relief that is afforded to an individual after a chargeable gain has been deducted of any available allowable losses, whereby the chargeable gain still remains higher than the exemption threshold. This type of relief applies after all other deductions have been made, and is directly in regard to how long the asset has been held and whether it was an asset used in a business context or whether it was a 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 particular individuals, capital gains tax is a sensitive subject; while it is recognized that a source of public funding is much needed, if it is applied in a rudimentary and rigid manner, it is able to discourage investment and commerce, consequently having a major negative impact on the economy.

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.

With regards to non-business assets, for holding periods of up to two years, the taper relief is inapplicable; however, for three years 95% of the chargeable gain is taxable, with this figure scaling down in increments of 5% to provide a minimum chargeable amount of 60% being taxable if this non-business asset is held for ten or more years. For further information on how this tax may affect your finances, please click here.

It is important to note that, however attractive this relief system may be, there are some chargeable gains that do not qualify for taper relief. These can include royalties, cash from mutual funds and capital sums from trusts in the capacity of a beneficiary.

If a chargeable gain is transferred to a future period by deferral, then the taper relief applied will be in relation to the original period that the asset was held in until it was disposed of. It does not occur until the chargeable gain is finally realized and does not operate culumatively. 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.

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