What is Capital Gains Tax Rates and Allowance?

What is capital gains tax (CGT)?

In the UK Capital gains tax (CGT) becomes taxable on the increase in value of your possessions - variety of items such as a second property, antiques or shares - during the time when you make money from the sale or transfer of assets. This amount of tax you have to pay is depends on your income and the asset, what is the current tax free allowance for is for particular tax year. Typical capital gains tax payable on:

• A second property that is not the main house
• Shares
• Funds or corporate bonds
• Valuables such as coins and stamps, jewellery, paintings, antiques and art
• The sale of a business
• Buy-to-let property.
• Land

But in the UK, you don’t have to pay Capital gain tax on:

• Gifts to a spouse, or a charity
• Selling your car, unless used for business
• Venture Capital Trusts
• If you are selling your mainhome
• ISA and SIPP holdings
• Certain business holdings which is qualify for entrepreneur’s relief

What is the Capital Gain Tax (CGT) allowance for 2020/21 and 2021/22

The capital gains tax allowance in 2021-22 is £12,300.

The Annual Exempt Amount (AEA) for individual is £12,300 and AEA for trust is £6,150.This is the amount in capital gains you can make this tax year before any tax is due. The capital gains tax allowances for the year 2020/21 was same £12,300 and AEA for trust is £6,000.This means your capital gains up to £12,300 are free.

How to calculate Capital Gain Tax (CGT) rate?

This can be complicated to work out, so you can advice from a professional tax expert in Brighton.

Taxable Income: Annual income – (Personal Allowance + Other Relief you might have) = Value
Taxable gains: Selling price of an asset – cost of asset purchased = Value

To calculate CGT on selling of an asset, you must be aware of the “type of the asset”, net profit from selling of the asset. Suppose, you are earning £50,000 in a particular tax year and sell some of the shares for £30,000, after buying them for £5,000 two years ago. This will gives you net profit of £25,000. If you are not sure what is your net profit is; you can use this guide how much tax you need to pay on capital gains tax calculator. In the UK, higher Capital Gains Tax is reduced from 28% to 20% and the basic rate reduced from 18% to 10%.

Do you have any questions about the capital gains tax, get in touch with tax expert for more information.