Capital Gains Tax

Capital Gains Tax is a tax on the profit or gain from selling, giving away, transferring or exchanging assets such as shares or property. The gain you make is taxed, not the revenue. Each individual is entitled to a tax-free allowance (Annual Exempt Amount) and some additional reliefs that may reduce Capital Gains Tax.

Annual Exempt Amount (Tax-free allowances for Capital Gains Tax)

Nearly everyone who is liable to Capital Gains Tax is entitled to annual tax-free allowance known as Annual Exempt Amount each year. The amount of profit does not affect this entitlement. As a result you pay Capital Gains Tax only on profits above your Annual Exempt Amount.

 

The same Annual Exempt Amount applies to:

  • Individuals who live in the UK
  • Executors or personal representatives of a deceased person’s estate
  • Trustees for disabled people

Most other trustees are entitled to a lower Annual Exempt Amount.

 

Taxpayer group Annual Exempt Amount
2015-16 2016-17
Individuals, personal representatives and trustees for disabled people £11.100 £11.100
Other trustees £5.550 £5.550
Executors and personal representatives

Acting as an executor or personal representative for a deceased person’s estate, you are entitled to the full Annul Exempt Amount during the “administration period” which is the time to settle the deceased person’s affairs and get a grant of probate.

 

Executors and personal representatives are entitled to the Annual Exempt Amount for the year in which the death occurred and the following two tax years. After this period, gains made during the administration period are not subject to tax-free allowance.

Trustees for disabled people

Acting as a trustee for a disabled person, you are entitled to the higher Annul Exempt Amount. A disabled person in this context is a person receiving the middle or higher rate of Attendance Allowance or Disability Living Allowance or having mental health problems.

People who are not-domiciled in the UK (non-doms)

As a rule individuals who are both resident and domiciled in the UK are liable to UK taxation on their domestic and worldwide income and gains.

 

People, who are not-domiciled in the UK – so called “non-doms” and have claimed the “remittance basis” of taxation on their foreign income and gains, are not entitled to the Annual Exempt Amount. From 6 April 2008, long term non-doms wishing to retain the remittance basis are required to pay an annual tax of £30,000.

 

An individual is non-domiciled in the UK if he or she was born outside the UK and intend to return to there.

 

If you are non-domiciled in the UK and have decided that it is more beneficial to be taxed on the foreign income and gains that you bring into the UK, rather than on all your foreign income and gains, you can claim the “remittance basis”.

 

All issues concerning the taxation of foreign income and gains are quite complex. Each case is specific and requires careful management. That is why it is worth contacting with your tax advisor or accounting office. Capital Business Links Ltd would be more than happy to assist you in all matters of non-domicile and taxation of foreign gains. Please, do not hesitate and call us on the telephone number 0208 567 99 44.

Capital Gains Tax rates

The current Capital Gains Tax rates are as follows:

 

Taxpayer group Total taxable gains and income per tax year Capital Gains Tax rates
till 22.06.2010 From 23.06.2010
Basic rate taxpayer up to £37,400 18% 18%
Higher and additional taxpayers from £37,401 18% 28%
Entrepreneurs' Relief

Businesspeople and some trustees are entitled to claim a relief on qualifying gains, up to a maximum lifetime limit, earned on the disposal of any of the following assets:

  • all or part of their business
  • the assets of their business after it has ceased
  • shares in their company

Entrepreneurs’ Relief reduces the amount of the Capital Gains Tax to be taxed on a sale of the qualifying business assets. The relief is available if:

  1. You are in business, for example as a sole trader or as a partner in a partnership
  2. You hold shares in your personal trading company

Entrepreneurs’ Relief is not available for companies.

 

According to the Emergency Budget of 22 June 2010, from 23 June 2010:

  • Qualifying gains are taxed at 10%.
  • The limit of a lifetime total has been raised from L1 to L5 million.