Capital Gains Tax
Capital Gains Tax Allowances, Liabilities & Reliefs
In the tax year 2011/2012 an individual has a CGT allowance of £10,600 (10/11 £10,100).
This means you do not have to pay tax on gains from buying and selling shares or other investments during the tax year up to that amount. You do not normally have to pay tax on any gain you make when you sell your main residence.
| 2011/2012 | from 23rd June 2010 | from 6th April 2010 | |
|---|---|---|---|
| For standard rate taxpayers | 18% | (18%) | (18%) |
| For trustees and higher/additional rate taxpayers | 28% | (28%) | (18%) |
| Annual exempt amount - individuals | £10,600 | (£10,100) | (£10,100) |
| Annual exempt amount - trusts | £5,300 | (£5,050) | (£5,050) |
| Entrepreneurs' relief lifetime limit | £10,000,000 | (£5,000,000) | (£2,000,000) |
| Entrepreneurs' rate | 10% | (10%) | (10%) |
If you have used your CGT allowance, don't forget your Individual Savings Account (ISA) allowance. Both a 'Cash ISA' and a 'Stocks and Shares ISA' can shelter capital gains on investments, for example unit trust holdings, worth up to £10,680 per year.
From 6th April 2008 Taper Relief was removed and a new relief called 'Entrepreneurs' relief' was introduced to reduce the Capital Gains Liabilities on the disposal of certain business assets.
CGT is a tax on capital 'gains'. If when you sell or give away an asset it has increased in value, you may be taxable on the 'gain' (profit). This doesn't apply when you sell personal belongings worth £6,000 or less or, in most cases, your main home.
When do I have to pay CGT?
You may have to pay CGT if, for example, you:
- sell, give away, exchange or otherwise dispose of (cease to own) an asset or part of an asset
- receive money from an asset - for example compensation for a damaged asset
You don't have to pay CGT on:
- your car
- your main home - provided certain conditions are met
- ISAs or PEPs
- UK Government gilts (bonds)
- personal belongings worth £6,000 or less when you sell them
- betting, lottery or pools winnings
- money which forms part of your income for income tax purposes
Important Considerations:
- if you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
- you may not give assets to your children or others or sell assets to them cheaply without having to consider CGT
- if you make a loss you may be able to make a claim for that loss and deduct it from other gains, but only if the asset normally attracts CGT
- if someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time - however if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal
Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.
The Financial Services Authority do not regulate tax planning.
For further information about the 2011 Budget changes please click here.