CGT is payable on capital gains made in the tax year, after deduction of capital losses, available reliefs and the annual exemption. The rate of CGT is 28%, unless the net gains can utilise the unused basic rate income tax band of the taxpayer, in which case the rate of CGT is 18%. Where entrepreneurs' relief applies to the gain the rate of CGT is 10%.
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.
Entrepreneurs' Relief (ER)
Gains made on disposal of the following assets may qualify for Entrepreneurs' Relief if the asset/shares or options have been owned for at least a year:
- a business or an interest in a business
- business assets sold within 3 years of the business ceasing
- 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 company's shares
An individual can claim ER on qualifying disposals until the lifetime total of such gains reaches £10m.
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; and cars.
The taxpayer's only or main home will be exempt for the periods the taxpayer lives there, or is deemed to live there, plus the last 18 months of ownership. A taxpayer with more than one residence can make an election (within 2 years of acquiring the second or subsequent home) to choose which is to be exempt. There are different requirements if the home is in a country where the taxpayer is not resident for tax purposes.
An investment property which is rented out and has never been occupied by the owner can never be exempt from CGT.
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.