The chargeable gains of the tax year, after deduction of capital losses, available reliefs and the annual exemption, are taxable. The rate is 28%, unless these gains can utilise unused basic rate income tax band of the taxpayer, in which case they are taxed at 18%. CGT is self-assessed, reported and paid in conjunction with income tax– details are given in Personal Taxation.
When a chargeable asset is given away, the donor is treated as receiving the full market value and is liable for CGT accordingly. However, there is no charge on disposals between spouses or registered civil partners who are living together. On such disposals, the transferee takes over the transferor’s CGT cost.
Disposals of the following assets may qualify for Entrepreneurs' Relief if they have been owned for at least a year:
- a business or an interest in a business.
- shares in a trading company of which the individual is an officer or employee and holds at least 5% of the share capital, or acquired the shares under an EMI scheme
- assets used in the business/company and sold at the same time as the interest in the business/shares.
An individual will qualify for relief on all disposals until the lifetime total of such gains reaches £10m. The first £10m of gains will be charged to CGT at 10% instead of 18% or 28%
Other major CGT reliefs
A number of types of asset are exempt from CGT, including chattels (tangible
movable property) which are bought and sold for less than £6,000; cars; and
the taxpayer's only or main residence. A taxpayer with more than one residence can make an election (within 2 years of acquiring the second) to choose which is to be exempt, but it is not possible to apply the exemption to an investment property which is rented out and has never been occupied by the owner. Periods of absence or letting may lead to some of the gain being chargeable, but not the last 18 months before disposal.
Gifts to charity are not charged to CGT, and gifts of quoted shares and land
also enjoy an income tax relief (see Personal Taxation).
Deferral of gains is allowed on some types of reinvestment, such as
subscription for new EIS shares (see Investment Reliefs).
There is no CGT on gains accrued to the date of a taxpayer's death. Instead, the value of the estate may be subject to Inheritance Tax.