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 Budget proposed changes to the rates of tax for 2010-11. Please see the section 'Budget changes for 2010-11' below.
Capital Gains Tax is charged at a flat rate of 18 per cent
Capital Gains Tax is charged at a flat rate of 18 per cent
Before 6 April 2008, ‘personal representatives’ or executors dealing with the estate of a deceased person and most trustees paid Capital Gains Tax at a single rate of 40 per cent. Everyone else paid Capital Gains Tax at a variable rate (eg 10 per cent, 20 per cent and 40 per cent) based on the amount of their income and gains.
Find out more about working out 2007-08 rates
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.
| Annual Exempt Amounts | |||
|---|---|---|---|
| Customer group | 2008-09 | 2009-10 | 2010-11 |
| Individuals, personal representatives and trustees for disabled people |
£9,600 | £10,100 | £10,100 |
| Other trustees | £4,800 | £5,050 | £5,050 |
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 made 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.
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 753K)
The table above shows the tax-free allowances. No changes were proposed in the Budget.
6 April 10 to 22 June 2010 - For gains made during this period Capital Gains Tax continues to be charged at a flat rate of 18 per cent and Entrepreneurs' Relief is given by reducing the amount of gains liable to Capital Gains Tax by four-ninths up to the maximum lifetime limit of £2 million.
23 June 2010 onwards - For gains made from this date the following Capital Gains Tax rates apply:
The 10 per cent rate for Entrepreneurs' Relief replaces the previous method of giving Entrepreneurs' Relief (see above). The relief is subject to an increased maximum lifetime limit of £5 million.
For gains made on or after 23 June 2010, individuals need to work out their total taxable income before working out which Capital Gains Tax rate to use.
Find out more about working out your Income Tax
Mr P's total income, after deducting allowances and reliefs, is £20,000 and his capital gains, after tax-free allowance and reliefs, are £10,000.
The maximum basic rate band is £37,400. Mr P has used £20,000 of this amount against his income - so has £17,400 remaining.
As his gains are only £10,000, he has enough of the basic rate band remaining to cover his gains, so they are all taxed at 18 per cent.
Mrs T's total income, after deducting allowances and reliefs, is £30,000 and her capital gains, after tax-free allowance and reliefs, are £10,000. £5,000 of these gains qualify for Entrepreneurs' Relief.
The maximum basic rate band is £37,400. Mrs T has used £30,000 of this amount against her income - so has £7,400 remaining.
She allocates £5,000 against the gains that qualify for Entrepreneurs' Relief, so these are taxed at 10%.
She allocates the remaining £2,400 against her other gains, so these are taxed at 18%.
The remaining £2,600 gains (£5,000 less £2,400) are taxed at 28%.
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
