Annual exemption

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. Consideration should be given to ensuring that both spouses/civil partners utilise this facility. Different annual exemptions apply for Trustees of a settlement.

Main features

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%. For residential property the rates are 18% and 28% respectively. 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.

Reliefs

There are certain reliefs available to defer or reduce the rate of tax on certain disposals, including:

• Business Asset Disposal 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 done; and
• Any unused allowable losses from previous years, which can be brought forward in order to reduce any gains.