Back

Capital Gains Tax – rates of tax

Introduction

This briefing provides information on the rate of capital gains tax payable by individuals and trustees on the disposal of a chargeable asset. 

Core considerations  

  • The rate of Capital Gains Tax (CGT) payable will depend on an individual’s total taxable income.  
  • CGT is charged at the rate of either 10% or 18% for basic rate taxpayers. For higher or additional rate taxpayers, the rate is either 20% or 24%. 
  • Trusts are charged at a rate of 20% or 24%.

Contents

 

Rates of Capital Gains Tax for individuals

The rate of CGT payable depends on what type of chargeable asset is being disposed of and the tax band into which the gain falls when it is added to an individual’s other taxable income.

Higher or Additional Rate taxpayers pay 20% on gains from chargeable assets except for gains from residential property, which is taxed at 24%. 

For example 

Asif has taxable income of £92,000. He has taxable gains from selling his unit trusts of £35,000. After deducting the Annual Exempt Amount of £3,000 from the gain it leaves £32,000 to pay CGT on. 

Asif is a higher rate taxpayer due to his taxable income of £92,000. Therefore, he pays CGT at 20% on £32,000 = £6,400 


Basic Rate taxpayers pay 10% on gains from chargeable assets except for gains from residential property, which is taxed at 18%. If a gain pushes an individual into the higher or additional rate threshold, they will pay some CGT at both rates. 

If gains are made from both residential property and other assets, the Annual Exempt Amount can be used against the gains that would be charged at the highest rates. For example where 24% tax is paid. 

The same rules and rates apply for Scottish and Welsh Taxpayers even if they pay Income Tax at the Scottish or Welsh rates. 

For example - where the gain is within the basic rate band  

Jemima has taxable income of £20,000. She has taxable gains from selling her shares of £12,600. After deducting the Annual Exempt Amount of £3,000 from the gain it leaves £9,600 to pay CGT on. 

Adding this to Jemima’s taxable income of £20,000 = £29,600. This falls within the basic rate income tax band and so CGT is paid at 10% on £9,600 = £960 

 

For example - where some of the gain is within the higher rate tax band

Hanza has taxable income (after the personal allowance) of £24,500. He has taxable gains from selling his unit trusts of £26,200. After deducting the Annual Exempt Amount of £3,000 from the gain it leaves £23,200 to pay CGT on. 

Adding this to his taxable income of £24,500 = £47,700 and so some of the gain falls into the higher rate tax band. 

Hanza has £13,200 remaining in his basic rate tax band (£37,700 minus £24,500). This can be taxed at 10% = £1,320. 

The remaining gain of £10,000 (£23,200 minus £13,200) is taxed at 20% = £2,000. 

Hanza pays a total of £3,320 in CGT. 

If the asset Hanza sold was a residential property (for example, a property he has never lived in but has rented out), the rates of tax he pays are 18% on the first £13,200 and 24% on the remaining £10,000 of the gain. 

 

Rates of Capital Gains Tax for trustees, personal representatives, and companies

The CGT rate applying to all trusts on gains more than the available annual exemption is 20% (24% if residential property).  

The gift of an asset into trust is a disposal for CGT purposes at the market value, although gains may sometimes be held over. 

The CGT rate applying to personal representatives who incur a chargeable gain during the administration period of an estate, after allowing for the full annual exemption, is 20% or 24% if the asset is residential property. 

Capital gains made by companies are charged to Corporation Tax at the company’s marginal rates and not CGT rates. The annual exempt amount is not available to companies. 

 

Back