Each tax year nearly everyone who is liable to Capital Gains Tax gets an annual tax-free allowance - known as the 'Annual Exempt Amount'. You only pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any reliefs) are above this amount.
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The annual tax-free allowance (known as the Annual Exempt Amount) allows you to make a certain amount of gains each year before you have to pay tax.
Nearly everyone who is liable to Capital Gains Tax gets this tax-free allowance.
There's one Annual Exempt Amount for:
Most other trustees get a lower Annual Exempt Amount.
Customer group |
2010-11 |
2011-12 |
|---|---|---|
Individuals, personal representatives and trustees for disabled people |
£10,100 |
£10,600 |
Other trustees |
£5,050 |
£5,300 |
You can use your Annual Exempt Amount against the gains charged at the highest rates to minimise the tax you owe. See the section on 'Rates for Capital Gains Tax' below for an example.
If you're acting as an executor or personal representative for a deceased person's estate, you may get the full Annual Exempt Amount during the 'administration period'. The administration period is usually the time it takes to settle the deceased person's affairs and get a grant of probate (or confirmation in Scotland).
You're entitled to the Annual Exempt Amount for the tax year in which the death occurred and the following two tax years. After that there's no tax-free allowance against gains during the administration period.
Find out more about death, inheritance and Capital Gains Tax
If you're acting as a trustee for a disabled person you use the higher Annual Exempt Amount above - and not the rate for 'other trustees'.
A disabled person in this context is a person who has mental health problems or receives the middle or higher rate of Attendance Allowance or Disability Living Allowance.
Find out more about Capital Gains Tax and trusts
You won't get the Annual Exempt Amount if you're 'non-domiciled' in the UK and you've claimed the 'remittance basis' of taxation on your foreign income and gains.
You may be 'non-domiciled' in the UK, for example, if you were born in another country and intend to return there.
You may have claimed the 'remittance basis' if you have income and gains from abroad and have decided that it's beneficial to be taxed on the foreign income and gains that you bring into the UK, rather than on all income and gains that arise.
Issues of domicile and tax on foreign gains are complicated. A lot depends on the facts of each case. You can find out more by following the link below. Or speak to your Tax Office about your specific circumstances.
Download guidance on 'residency', 'domicile' and the 'remittance basis' (PDF 560K)
The following Capital Gains Tax rates apply:
If you're not sure how to work out your taxable income, see the examples in the section below 'Working out your Capital Gains Tax for 2011-12'.
Capital Gains Tax is charged at a flat rate of 18 per cent.
The following Capital Gains Tax rates apply to gains after this date:
Find out more about Entrepreneurs' Relief
Capital Gains Tax is charged at a flat rate of 18 per cent
You need to work out your total taxable income before working out which Capital Gains Tax rate to use.
If you have gains which are charged at different rates, you need to decide how to use your Annual Exempt Amount. You use it against the gains charged at the highest rates to minimise the tax you owe.
Find out more about Income Tax bands and rates
Mr P's total income, after deducting allowances and reliefs, is £20,000 and his capital gains, after reliefs, are £15,000.
The basic rate band is £35,000. Mr P has used £20,000 of this amount against his income - so has £15,000 remaining.
As his gains are only £15,000, he has enough of the basic rate band remaining to cover his gains, so they are all to be taxed at 18 per cent. He now deducts his tax-free allowance of £10,600 and pays Capital Gains Tax at 18 per cent on £4,400.
Mrs T's total income, after deducting allowances and reliefs, is £28,000 and her capital gains, after reliefs, are £20,000. £5,000 of these gains qualify for Entrepreneurs' Relief.
The basic rate band is £35,000. Mrs T has used £30,000 of this amount against her income - so has £7,000 remaining.
She has to allocate £5,000 against the gains that qualify for Entrepreneurs' Relief, and pays tax on these at 10 per cent.
She allocates the remaining £2,000 basic rate band against her other gains, so these are taxed at 18 per cent.
Her tax-free allowance of £10,600 is allocated to her remaining £13,000 gains. This leaves £2,400 gains taxed at 28 per cent.
Read more about Entrepreneurs' Relief
Find out more about Capital Gains Tax
How to work out your gain or loss
Corporation Tax on chargeable gains for companies: Indexation Allowance
