Capital gains tax

Published: 26 Jul 2013

Updated: 13 Mar 2020

 

Written by Ray Coman

 

 

  2020-21 2019-20 Note
Annual Exemption:      
Individuals £12,300 £12,000  
Trusts £6,150 £6,000  
Entrepreneurs' relief: lifetime allowance £1 million £10 million  
Investors Relief: lifetime allowance £10 million £10 million  
Basic and starting rate taxpayers 10% 10% A
Higher and additional rate tax payers 20% 20% A
Trusts and personal representatives 20% 20% A
Rate where entrepreneurs/investors relief applies 10% 10%  

 Gains on carried interest and and chargeable residential property - 8% surcharge

 

Non UK residents: Non UK residents subject to capital gains tax (or corporation tax for companies) on sale of UK residential property and, from 6 April 2019, non residential property and certain disposals of interests in UK property rich entities.

 

From 6 April 2019,certain disposals of UK land and buildings by non residents must be reported and the tax paid to HMRC within 30 days of sale. 

 

UK residents are generally entitled to an annual exemption from capital gains tax. Gains which are above the above amount are taxable. Taxable gains are added to total income and to the extent that the resulting total is less than the basic rate band the gain is taxed at 10%. To the extent that gains increase the total amount above the basic rate they are subject to the higher rate stated above.
 

Certain gains are entitled to entrepreneurs' relief. Gains that qualify for entrepreneurs' relief will be taxed at the above rate of 10% subject to a lifetime limit for each taxpayer, currently £1,000,000.

 

The annual exemption is reduced for gains made by a trust. The annual exemption is divided according to the number of trusts set up by the same settlor.

 

Investor relief is available to outside investors in a trading company that is unlisted.  The relief, introduced by the Finance Act 2016, applies to investment made on or after 17th March 2016.  The investor must subscribe for newly issued shares in an unlisted trading company and the shares must be held for a minimum of three years to qualify.  An investor cannot claim SEIS or EIS relief that would otherwise apply.  There is a cash flow incentive to take the tax reducer on intial investment than the capital gains tax reduction on eventual sale.  Which tax conecession to apply for will depend on the extent to which the investor believes the investee will appreciate in value.  There is no indication that the investor's relief lifetime allowance has been restrticed by the 2020 Budget.

 

Information on the chattel exemption can be read in the article on chattels.

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