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Tax-free allowances for Capital Gains Tax

Source: HM Revenue & Customs | | 26/02/2018

The annual exemption for Capital Gains Tax (CGT) in the current tax year is £11,300. This exemption allows taxpayers who dispose of chargeable assets such as property, stocks and shares of up to this amount, to make a tax-free gains during 2017-18.

A husband and wife both benefit from their own exempt amount. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes. Married couples and civil partners should ensure that assets sold at a gain are either jointly owned or that each partner utilises their annual exempt amount wherever possible. Any unused part of the annual exempt amount cannot be carried forward and is forfeited if not used.

CGT is usually charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT applies (18% and 28%) to gains on the disposal of residential property (apart from a principal private residence).

Planning note

There are a number of qualifying conditions that must be met in order to qualify for the relief. If you have sold or are planning to sell any assets in the current tax year it is important to ensure that you take full advantage of the annual CGT exemption and arrange your affairs to ensure the optimum CGT position. For example, capital losses are deducted from gains before net gains are calculated. Crystallising a loss that will waste the annual exemption should therefore be avoided.

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