A capital gain arises when certain capital (or ‘chargeable’) assets are sold at a profit. The gain is the sale proceeds (net of selling costs) less the purchase price (including acquisition costs).
Every tax year each individual is allowed to make gains up to the annual exemption without paying any CGT, the exemption is updated each year so please see our factsheet section for the current rate. Consideration should be given to ensuring both spouses/civil partners utilise this facility. Different annual exemptions apply for Trustees of a settlement.
Capital gains tax at the rate of 10% applies to gains (including any held over gains coming into charge) where net total taxable gains and income is below the income tax basic rate band, with any excess gain being charged at 20%. Higher rates of 18% below basic rate band and 28% excess gain will apply to certain residential property.
Disposals of chargeable assets must be reported if the total gains in the year exceed the annual exemption or if the proceeds of the sale are more than 4 times the annual exemption (even if no gain or loss is made). Unused losses may be used to offset gains incurred in later years.
There are certain reliefs available to defer or reduce the rate of tax on certain disposals.
- Entrepreneurs’ relief, which applies to certain business disposals and reduces the effective rate of tax to 10% private residence relief
- business asset roll-over relief, which enables the gain on a business asset to be deferred until a point in the future
- business asset gift relief, which allows the gain on business assets that are given away to be held over until the assets are disposed of by the donee
- any unused allowable losses from previous years, which can be brought forward in order to reduce any gains
Please contact us for further information on how we can help you with capital gains tax.