Capital gains tax allowances and rates
By Ian Robinson
Capital gains tax allowances and rates
You can make a certain amount in capital gains each year before any tax is due. Here are the CGT allowances and rates for 2017-18.
|Capital gains tax allowances and rates: a summary|
|Rate on non-property assets||10% (basic-rate taxpayers) or 20% (higher and additional-rate taxpayers)||10% (basic-rate taxpayers) or 20% (higher and additional-rate taxpayers)|
|Rate on additional property assets||18% (basic-rate taxpayers) or 28% (higher and additional-rate taxpayers)||10% (basic-rate taxpayers) or 20% (higher and additional-rate taxpayers)|
Capital gains tax rates
Since April 2016, lower capital gains taxes (CGT) have been levied on most investments. People who pay basic-rate income tax pay CGT at 10% (18% prior to April 2016), and higher-rate taxpayers are charged CGT at 20% (previously 28%).
If you are a basic-rate taxpayer by virtue of your income but have made large enough taxable capital gains to push you over the threshold above which income tax is levied at 40% (£33,500 taxable income in 2017-18, £32,000 in 2016-17), you will pay the higher rate of CGT on the portion of gains that takes you over the threshold .
The previous, higher, rates (18% and 28%) still apply to sales of residential property however (on the sale of second homes or buy-to-let investments).
You don’t pay capital gains tax on the full amount you make as everyone has a yearly tax-free allowance: £11,300 in 2017-18 and £11,100 in 2016-17. Annual allowances and exceptions mean in some cases gains are tax free (see below).
On your 2017-18 tax return, you must give details if your taxable gains for the year came to more than £11,300 or the total value of the assets you disposed of (other than those which are tax-free) came to more than £45,200. HMRC's online tax return service includes capital gains.You must include your workings for each capital gain or loss that you report.
Under current rules, any CGT due on the sale of property is payable by 31 January after the end of the tax year in which the sale occurred. Depending on the date of the sale, this can give you between 9 months and 18 months to pay. In the 2015 Autumn Statement, however, the Chancellor announced that from 2019 onwards, CGT on property sales would be payable within 30 days.
Tax free gains
You don’t have to pay tax on all capital gains. Those listed below are tax-free:
- gifts between husband and wife or registered civil partners (no tax at the time, but any gain passes to the new owner and may be taxed on a later disposal)
- gifts to charities.
- sale of your only or main home (but see CGT on your home).
Gift or sale
- private cars
- personal possessions (‘chattels’) such as antiques worth no more than £6,000. If you sell a set (of chairs, for example), the £6,000 limit applies to the set, not each item. More valuable possessions may also be exempt, as long as their useful life is 50 years or less. These are known as 'wasting assets'. An example is a boat. See also CGT and possessions.
- betting, pools and lottery winnings
- National Savings & Investments products, Isas, pensions and child trust funds
- proceeds from life insurance policies, unless bought second-hand
- gilts, most corporate and local authority bonds and building society permanent interest-bearing shares (Pibs) and Sharia-compliant equivalents
- shares while held in approved share incentive plans and in some schemes to encourage investment in new and growing businesses.
When you die
- whatever you leave on death (though inheritance tax may be payable instead).
Get a personalised answer to your tax questions
The Which? Money Helpline offers independent one-to-one guidance on all kinds of tax queries, including those surrounding capital gains tax. If you're not a Which? member and you'd like to get unlimited access to the helpline, you can try Which? Money for two months for £1.
- Last updated: April 2017
- Updated by: Tom Wilson