Rate of CGT Print

The rate at which CGT is charged depends upon the income tax rate of the person making the disposal. Individuals pay CGT at a reduced rate where their total taxable gains and income are less than the upper limit of the income tax basic rate band of £37,500 for 2020/21, and £37,700 for 2021/22, but this is after any personal allowances etc. Gains in excess of this limit are taxed at the full rates. Trustees pay CGT at the full rate on all gains.

Gains arising on the disposal of residential property that does not qualify for Principal Private Residence (“PPR”) relief, and gains on carried interest, are taxed at a higher rate than other gains. The rates of CGT for 2020/21 and 2021/22 are as follows:

 

  Reduced Rate Full Rate
Residential property and carried interest 18% 28%
All other capital gains 10% 20%

Business Asset Disposal Relief “(BADR”) which charges certain gains at the rate of 10% may be available in respect of certain business assets. (See section on Business Asset Disposal Relief)

The calculation of most gains is very straightforward.

Example 1:

Jill bought a house to let in August 1987 at an overall cost of £61,400. In September 2001 she spent a further £58,000 on an extension. She sells the house in February 2022 for proceeds (after costs) of £355,200. She has no other gains in the year, and her taxable income after personal allowances is £25,000. Her CGT liability is calculated as follows:

£ £
Sale Proceeds 355,200
Less Costs 61,400
Enhancement expenditure 58,000
119,400
Gain 235,800
Less Annual Exemption 12,300
Taxable Gain 223,500
Tax thereon @ 18% (£37,700-25,000) 12,700 2,286
Tax thereon @ 28% 210,800 59,024
Total CGT Payable 61,310

Example 2:

In May 2014 Allan bought some shares in a listed company for £60,000. He sells the shares for £150,000 in September 2021. Allan made no other gains in the year and is a higher rate taxpayer. His CGT liability is calculated as follows:

£
Sale Proceeds 150,000
Less Cost 60,000
Gain 90,000
Less Annual Exemption 12,300
Taxable Gain 77,700
Total CGT Payable @20% 15,540

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