Capital Gains Tax for individuals

What is Capital Gains Tax

Capital Gains Tax (CGT)  is charged on the capital gains accruing from the disposal of an asset. i.e where assets are sold at a profit. There is no CGT on death.

You usually dispose of an asset when you cease to own it: sell it, give it away, transfer it, exchange it, received compensation for it. It is the gain you make on the disposal of the asset that is taxed not the amount of money you receive. You only pay capital gains tax if the overall gain is above the tax free allowance and you are not entitled to an exemption.

If you have capital gains tax to pay, or a loss you want to claim, and haven't received a tax return or letter asking you to complete a tax return, you need to contact HMRC .

CGT & Companies

  • Companies are excluded from CGT and are chargeable to corporation tax on their chargeable gains instead. Companies are not entitled to the annual CGT exemption generally available to individuals.

Capital Gains Tax Rates

  • 18% for gains falling in basic rate band,
  • 28% for gains falling in higher or additional rate bands.
  • 28% for all gains made by trustees and PRs. No relief for inflation.
  • Gains which are included in a successful claim for entrepreneurs relief, and which falls within the lifetime cap for that relief, are taxed at 10%. The cap is £5m.

Capital Gains Tax Exemptions

  • Nominees and Bare trustees
  • Charities
  • Community amateur sports clubs

There are a number of exempt assets set out by TCGA 1992. Listed below are a few of the commonly queried exemptions:

  • Winnings
  • Compensation
  • Death
  • ISAs and PEPs
  • Life insurance and deferred annuities
  • Private residences
  • Pension funds
  • Agricultural grants
  • Debts
  • Works of art
  • Chattels > £6k
  • Motor cars

Annual Exemption

Most individuals are entitled to an annual exemption. Any unused part of an annual exemption is lost.  Spouses and civil partners are entitled to their own annual exemption, which is not transferable.

Special rules

These apply to the following:

  • shares and securities
  • options and deposits
  • land
  • furnished holiday lettings
  • chattels
  • wasting assets
  • debts
  • assets appropriated to and from trading stock

Capital Gains Tax Reliefs

Reliefs you may be entitled to:

  • private residence relief
  • entrepreneurs relief
  • lettings relief
  • gift relief
  • business asset roll-over relief
  • business asset gift relief
  • any unused allowable losses from previous years
  • rollover relief
  • holdover relief
  • deferral relief

Business Assets

Business assets that may be subjected to capital gains tax:

  • Shareholdings in privately owned trading companies
  • Goodwill associated with a business that is run by a sole trader or partnership
  • residential property other that your main residence
  • commercial property let to,or otherwise used by, privately owned trading organisations, including your business

How Our Tax Team Can Help You

As you can see careful planning is essential. Capital gains can arise in many situations. Please talk to us before you make any decisions.The legislation is complex and there are many exemptions and adjustments that can be benefited from, which may lead to significant tax savings and mitigate or reduce potential tax liabilities. 

For your ease we have listed below related articles on this topic.  Where applicable there is also a list of useful links on the left hand side.

If you would like to speak to someone please do not hesitate to contact us.