Capital Gains Tax Relief

Capital Gains Tax Relief Overview

Capital Gains Tax (CGT) applies when you make a profit on selling or disposing of taxable assets such as shares, investment property, cryptocurrency, land, or valuable personal items worth more than £6,000.  Several asset types are fully exempt, and a range of reliefs can reduce or defer CGT depending on the circumstances.

Assets Exempt From Capital Gains Tax

These assets are not subject to CGT when sold or disposed of:

• Main residence (your primary home)
• ISAs and other tax‑sheltered investment wrappers
• UK government gilts and bonds
• National Savings Certificates and Premium Bonds
• Cash held in sterling or foreign currency for personal use
• Gambling winnings
• Personal injury compensation
• Private cars, including classic and vintage vehicles
• Wasting assets with a predictable life under 50 years (boats, caravans, clocks, wine)
• UK bullion coins produced by the Royal Mint
• Personal possessions under £6,000, including antiques

All other assets—such as shares, investment accounts, additional properties, land, and cryptoassets—may be subject to CGT.

CGT Rates and Allowances

Individuals receive an annual CGT allowance of £3,000.00.  Gains above this amount are added to taxable income to determine the rate:

• 18.00% on gains within the basic rate income tax band
• 24.00% on gains falling into the higher‑rate band, with any portion below the threshold taxed at 18.00%

Business‑Related CGT Reliefs

Several reliefs apply to business assets.  Some remain relevant today, while others apply only to older disposals.

Business Asset Disposal Relief (BADR)

• Formerly Entrepreneurs’ Relief
• Applies to qualifying disposals of trading businesses or shares
• Gains taxed at 14.00%
• Lifetime limit of £1 million of qualifying gains per individual

Taper Relief (Withdrawn 6 April 2008)

• Applied between 6 April 1998 and 5 April 2008
• Reduced the taxable portion of a gain based on how long the asset was held
• Different taper rates applied to individuals, trusts, and business assets

Indexation Allowance

• Applied to assets acquired between 31 March 1982 and 5 April 1988
• Adjusted the asset’s cost for inflation using the Retail Prices Index
• Could not create or increase a capital loss
• Does not apply to assets acquired after 5 April 1998

Rollover Relief

• Available for trading assets such as land, buildings, plant, and machinery
• Full disposal proceeds must be reinvested in qualifying assets
• Reinvestment must occur from one year before to three years after disposal
• Defers the gain into the new asset

Holdover Relief

• Defers gains on gifts or transfers of certain assets
• Applies to transfers chargeable to Inheritance Tax, disposals of trading assets, and gifts to trusts for disabled beneficiaries
• Does not apply to transfers of shares to a company or to trusts where the settlor retains an interest

Reinvestment Relief

• Defers gains reinvested into qualifying shares, such as under the Enterprise Investment Scheme (EIS)
• Reinvestment must occur from one year before to three years after disposal
• The gain remains deferred while the qualifying shares are held

Key Points at a Glance

• Many everyday assets are exempt from CGT
• Gains above £3,000.00 are taxed at 18.00% or 24.00% depending on income
• BADR offers a reduced 14.00% rate on qualifying business disposals
• Historical reliefs (taper relief, indexation) still matter for older assets
• Rollover, holdover, and reinvestment reliefs can defer CGT in specific situations

Frequently Asked Questions

Which assets are exempt from CGT?

Your main home, ISAs, gilts, Premium Bonds, personal possessions under £6,000, wasting assets, and certain compensation payments are exempt.

What is the current CGT allowance?

Individuals have a £3,000.00 annual CGT allowance.

How are CGT rates applied?

Gains above the allowance are added to your taxable income.  Gains within the basic rate band are taxed at 18.00%, and gains above it at 24.00%.

What is Business Asset Disposal Relief?

BADR reduces the CGT rate to 14.00% on qualifying business disposals, up to a £1 million lifetime limit.

Do older reliefs still matter?

Yes.  Taper relief and indexation allowance may still apply to assets acquired before their withdrawal dates.

Can CGT be deferred?

Yes.  Rollover relief, holdover relief, and reinvestment relief can defer CGT when conditions are met.

Are all personal items taxable?

No.  Personal possessions under £6,000 and wasting assets with a life under 50 years are exempt.

Are cryptoassets subject to CGT?

Yes.  Cryptocurrency is treated as a taxable asset unless it falls under a specific exemption.