Capital Gains Tax rates and bands

Capital Gains Tax rates and bands

Capital Gains Tax rates and bands – Introduction

This article sets out the capital gains tax rates and bands that currently apply.

  Tax year 2018/19 Tax year  2017/18 Tax Year 2016/17
Basic rate taxpayer: general rate 10% 10% 10%
Basic rate taxpayer: exception assets 18% 18% 18%
Higher rate taxpayers: general rate 20% 20% 20%
Higher rate taxpayers: exception assets 28% 28% 28%
Annual exemption (“AE”) for an individual £11,700 £11,300 £11,100
AE for Trustees £5,850 £5,650 £5,550

 

Capital gains tax rates and bands – Exception assets

With effect from 6 April 2016, the general CGT rate has fallen to 10% for basic rate taxpayers and 20% for higher rate taxpayers.

However, this reduction in the rate did, and does not, apply to the disposal of certain assets. Specifically, these assets are:

  • The disposal of residential property; and
  • The disposal of carried interest (for private equity professionals)

Entrepreneurs’ Relief (ER)

ER is available on the disposal of certain trading assets where certain conditions are met. For instance, an entrepreneur who sells his or her shares in their company will generally be able to claim this valuable relief.

The effect of the relief is that any gain that qualifies is subject to an effective rate of 10%.

There is a maximum lifetime cap on the amount of Entrepreneurs’ Relief that a taxpayer can receive. With sensible planning, if one was concerned about the headroom on this relief, then one could consider splitting ownership of qualifying assets with a spouse (and ensuring they meet the conditions).

Capital gains tax rates and bands – Spouses and civil partners

The general rule is that assets transferred between either husband and wife or civil partners can be made free of tax. This is not technically an exemption but deems the asset to be transferred at a value that results in no gain and no loss. In other words, it is transferred at the transferor’s base cost.

The recipient is deemed to acquire the asset at the transferor’s base cost. This means that on disposal by the recipient then the full gain will crystallise. In other words, they have essentially inherited the previous person’s gain.

 

If you have any queries around capital gains tax rates and bands or have any other queries at all then please do not hesitate to get in touch.

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