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Indexation Allowance to be “removed” from next month

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Indexation Allowance to be “removed” from next month

The Indexation Allowance, which provides tax-relief for companies’ capital gains, will be frozen from next month to bring the corporate system “into line with personal capital gains tax”.

The measure was announced in Chancellor Philip Hammond’s Autumn Budget.

The Indexation Allowance allows for the effect of inflation when calculating the chargeable gains of companies or organisations.

Removing the relief is expected to cost business owners around £1.8 billion over the next five years. The change will go into effect from January 2018.

The move will affect a number of landlords who have recently incorporated to combat property tax changes – which includes the higher rate of stamp duty for second home owners as well as the gradual loss of mortgage interest relief between now and 2020.

Announcing the change in November, the Chancellor said: “There is a case now for removing the anomaly of the indexation allowance for capital gains – bringing the corporate system into line with personal capital gains tax.

“I will therefore freeze this allowance so that companies receive relief for inflation up to January 2018, but not thereafter.”

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