- CGT is payable by individuals, trustees and personal representatives (PRs). Companies pay corporation tax on their capital gains.
- There are annual tax free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.
- For individuals net gains are added to total taxable income to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income, do not exceed the basic rate band.
- Gains which qualify for Entrepreneurs’ Relief or Investors’ Relief are charged at 10% for the first £10m of qualifying gains.
Rates and annual exemption 2018/19
* For higher rate and additional rate taxpayers.
** Higher rates of 18% and 28% may apply to the disposal of certain residential property.
A personal representative is either an executor for the estate of a deceased person who left a will or the administrator of an intestate estate.
‘Total taxable income’
The total of income from all sources in excess of the personal allowances available to an individual. Income which is exempt from income tax, such as income from Individual Savings Accounts or casual gambling profits, are not taken into account when calculating total taxable income.
‘Basic rate band’
Basic rate band refers to the band of income in excess of the personal allowances available to an individual which is taxable at basic rate.
If individuals sell or dispose of their business, they may be able to claim Entrepreneurs’ Relief – which means paying 10% capital gains tax on profits.
Entrepreneurs’ Relief has been extended to external investors (other than certain employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘Investors’ Relief’ the following conditions need to be met:
- shares must be newly issued and subscribed for by the individual for new consideration
- be in an unlisted trading company, or an unlisted holding company of a trading group
- have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016
- have been held continuously for a period of three years before disposal.
An individual’s qualifying gains for Investors’ Relief are subject to a lifetime cap of £10 million.
This publication is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this publication can be accepted by the authors or the firm.