Capital Gains Tax

Published / Last Updated on 20/05/2017

Capital gains TaxCapital Gains Tax Advice 2017
(tax year 06/04/2017 to 05/04/2018)

Capital gains tax (CGT) is a tax on profits or capital gains that you make when you sell or give away certain capital assets that you own. 

What is taxed? - The sale price or value on the date you give away an asset less your yearly tax free allowance, less the purchase price is the taxable gain.

How much tax do I pay? There have been significant changes to Capital Gains Tax and taper relief, including the removal of taper relief for Individuals, Trusts and Business Assets in 2008 and the reduction of the real rate of tax (non property investments in 2017). 

1. Capital Gains Allowance and Rates 2017Make Sure You Use All Your Allowances To Save Tax

Annual Exemption for Individuals £11300

  • Individuals, husband and wife spouses and civil partners all have their own exemption.
  • This means that you can realise adjusted gains each year to the value of the allowance with no liability to taxes.

Rates of Capital Gains Tax CGT: Individuals - Chargeable gains are added to your taxable income. 

  • Standard Rate 10.00 %:  If your combined income and adjusted capital gain when added together, stays within the basic rate tax threshold, the capital gains tax CGT rate is 10.00 % of the chargeable gain
  • Higher Rate 20.00 %: If all or part of the gain when added to income is in higher rate tax threshold, the CGT tax rate is 20.00 % of the gain over higher rate income tax threshold and 18% of the gain below the threshold (if any)

Rates of Capital Gains Tax CGT: Individuals on Investment/Residential Property - Chargeable gains are added to your taxable income. 

  • Standard Rate 18.00 %
  • Higher Rate 28.00 %

Annual Exemption for Trusts - £5650

This means a trust can realise adjusted gains each year to the value of the allowance with no liability to taxes.  Normally the allowance is for all trusts created by the same person i.e. there is only one allowance for all trusts.  The rate of tax charged on a trust is 28%.

Annual Exemption for LPRs (Legal Personal Representives) - £11300

Annual Exemption - Businesses

Nil - there is no annual exemption, all gains are deemed as trading receipts and taxable at normal business or corporation tax rates.

Entrepreneurs Relief Rate for Business Assets.

CGT rate of 10.00 % of the chargeable gain is charged as a concession on the sale of  trading businesses and shares with a cumulative lifetime allowance for the individual as follows:

  • 06/04/2008 - 05/04/2010 business gain disposals up to £1m
  • 06/04/2010 - 22/06/2010 business gain disposals up to £2m
  • 23/06/2010 - 05/04/2011 business gain disposals up to £5m
  • 06/04/2011 - onwards business gain disposals up to £10m

Withdrawal of Tiered Rates and Taper Relief Before 5 April 2008:

  • Taxes used to be levied based upon your highest rates of income tax. for 2007/2008 and was tiered at: Lower rate taxpayers -10% capital gains tax, CGT Basic rate taxpayers - 20% capital gains tax CGT and Higher rate taxpayers - 40% capital gains tax CGT). Taper relief has also been abolished.
  • Rates of Tax - Trusts - The rate applicable to trusts was based upon the trustee and was tax up to 40% for certain types of income/gain to the trust.

2. Pay Capital Gains Tax

Capital gains tax (CGT) liabilities to tax are reported and paid as part of your self-assessment tax return.

There are special pages in the tax return to detail your gains and any taxes due.

The tax year ends on the 5 April and the tax is due to be settled on the following 31 January


3. Capital Gains Tax CalculationCapital Gains Tax Calculation

Calculation of Capital Gains Tax CGT - How Capital Gains Tax is Calculated:

Firstly, you need to work out the gain or profit.  This is done by deducting from the sale price or valuation on the date a gift is made, things like the original purchase price, including legal fees, any money spent on improvements and costs for selling or gifting the property.

Calculation of the gain - Rules after 6 April 2008

  • Work out the sale price or market value
  • Deduct any costs incurred when buying the asset e.g. legal fees, adviser fees, stockbroker fees, stamp duty
  • Deduct any enhancement or improvement costs not maintenance costs
  • Deduct any costs incurred in selling the asset e.g. auction fees
  • Deduct any capital losses incurred for other assets
  • Deduct your annual exemption
  • Result is the amount chargeable to tax - the chargeable gain
  • Gain is then tax at the current capital gains tax rates

Old Rules:  Calculation of the gains realised and made before 6 April 2008

  • Work out the sale price or market value
  • Deduct any costs incurred when buying the asset e.g. legal fees, adviser fees, stockbroker fees, stamp duty
  • Deduct any enhancement or improvement costs not maintenance costs
  • Deduct any costs incurred in selling the asset e.g. auction fees
  • Deduct any allowed indexation allowance (for assets acquired before April 1998)
  • Deduct any capital losses incurred for other assets
  • Calculate any taper relief
  • Deduct your annual exemption
  • Result is the amount chargeable to tax - the chargeable gain
  • Gain was added to your income
  • It was then taxed at either 10%,20%, 40% depending upon whether you were a lower, basic or higher rate tax band

Capital Gains What is Taxed

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