Following several questions from our subscribers and clients regarding Capital Gains Tax, below is an ‘At a glance’ guide to Capital Gains Tax reliefs.
- What are the key Capital Gains Tax reliefs?
- Who do they apply to?
- When does Capital Gains Tax apply?
- What are the rates/bands?
- What are the exemptions?
There are numerous Capital Gains Tax reliefs in the UK. All references are to the Taxation of Chargeable Gains Act 1992 (TCGA).
Where a relief is available to an individual it is generally available to the trustees of a settlement. There are some exceptions, please speak to the Robinsons team for more information.
Capital Gains Tax: Assets
| Type of relief | Gains on which type of asset | Who | When |
|---|---|---|---|
| Business Asset Disposal Relief (Entrepreneurs' Relief) (BADR) | A business and business assets, where business is a trade, profession or vocation, covering: • A Disposal of a business or part of a business • A disposal of the assets of a business following its cessation. | Individual: sole trader or partner | Claimed on tax return. Normal time limit within 12 months of filing deadline. |
| Business Asset Disposal Relief (Entrepreneurs' Relief) (BADR) | A Disposal of the shares or securities of an individual's personal company. | Individual: employee or officer | Claimed on tax return. Normal time limit within 12 months of filing deadline. |
| Business Asset Disposal Relief (Entrepreneurs' Relief) (BADR) | A Disposal of trust business assets. | Trustees and beneficiary | Claimed on tax return. Normal time limit within 12 months of filing deadline. |
| Business Asset Disposal Relief (Entrepreneurs' Relief) (BADR) | • A Disposal of business assets associated with a material disposal of an interest in a partnership or shares in a company. | Individual: partner, or employee/officer | Claimed on tax return. Normal time limit within 12 months of filing deadline. |
| Investors' Relief | A disposal of shares acquired by subscription. | Individual: not an employee or officer on subscription | Claimed on tax return. Normal time limit within 12 months of filing deadline. |
| Rollover (replacement of business assets) | Assets used for the purposes of a trade or a deemed trade including: • A building or any part of a building and any permanent or semi-permanent structure in the nature of a building occupied (as well as used) for the purpose of a trade. 'Trade' includes a qualifying Furnished Holiday Lettings business. • Any land occupied (as well as used) for the purposes of a trade. • Fixed plant or machinery which does not form part of a building or of a permanent or semi-permanent structure in the nature of a building. • Ships, aircraft, hovercraft. • Goodwill • Space stations and space vehicles • Milk quotas and potato quotas • Ewe and suckler cow premium quotas • Fishing quotas There are special rules for wasting assets (assets with a life of less than 50 years) that are normally exempt from Capital Gains Tax. Rollover does not apply in respect of the disposal of shares and securities. | Individuals & companies | Claimed on tax return. Normal time limit within 12 months of filing deadline. See Time limits |
| Rollover (Incorporation Relief) | A business and its chargeable assets transferred to a company (no requirement for there to be a trade) • Goodwill and intangible assets. • Land and property. | Individuals | On incorporation |
| Rollover (exchanges of joint interests in land) | Land jointly held and exchanged between co-owners. | Individuals | On exchange of interests |
| Disincorporation (Rollover) Ended 31 March 2018 | The goodwill and land and property in the transfer of a company's business (no requirement for it to be a trade) to its shareholders • Goodwill. • Land and property which is not held as trading stock. | Company | On disincorporation |
| Holdover (gift of business assets) Holdover (gifts chargeable to IHT) | An asset or an interest in an asset used for the purposes of a trade, profession or vocation carried on by: • The donor as a sole trader or in partnership • The donor's personal company, or, where their personal company is a holding company, a member of its trading group. Shares or securities in an unlisted personal company that is either a trading company or holding company of a trading group. • Personal company means a company where he holds at least 5% of the votes. Transfers of agricultural property. Relief is available to the trustees of a settlement if they carry on the trade themselves or it is carried on by a beneficiary with a life interest in the trust. Gifts of assets that are immediately chargeable to Inheritance Tax (IHT), or would be were it not for the IHT nil rate band these include: • Gifts into UK trusts, excluding settlor interested trusts • Gifts that are IHT exempt, such as gifts of heritage property, works of art, gifts to political parties and transfers out of young person's settlements | Trustees/ beneficiaries | Claimed using HS295 Time limit see: Time limits |
| Private Residence Relief (PRR) | Relief on the disposal of an individual's only or main private residence: • Land and property • Land restricted to a permitted area Restrictions introduced from 6 April 2015 in respect of claims for relief by: • Non-UK residents. • UK residents claiming relief for homes abroad. • See Non-resident CAPITAL GAINS TAX: UK property. | Individuals/ trustees | On the disposal of an only or main residence. Claimed on tax return. Normal time limit within 12 months of filing deadline. See Time limits Two year time limit on second property election |
What are the Capital Gains Tax rates, bands, reliefs and exemptions?
Capital Gains Tax: Rates
| From 6 April 2020 | 2019-20 | 2018-19 | 2017-18 | |
|---|---|---|---|---|
| Standard rate (basic rate taxpayers) | 10% / 18% * | 10% / 18% * | 10% / 18% * | 10% / 18% * |
| Higher rate taxpayers’ rate | 20% / 28% * | 20% / 28% * | 20% / 28% * | 20% / 28% * |
| Business Asset Disposal Relief (Entrepreneurs' Relief) - effective rate | 10% | 10% | 10% | 10% |
| Annual exemption | ||||
| Individual | £12,300 ** | £12,000 | £11,700 | £11,300 |
| Settlement(s) - trustees | £6,150 ** | £6,000 | £5,850 | £5,650 |
| Chattels exemption (proceeds per item or set) | £6,000 | £6,000 | £6,000 | £6,000 |
| Marginal relief | 5/3 excess over £6,000 | 5/3 excess over £6,000 | 5/3 excess over £6,000 | 5/3 excess over £6,000 |
| Business Asset Disposal Relief | £1 million | £1 million | £10 million (until 11 March 2020, then £1million) | £10 million (until 11 March 2020, then £1million) |
- * The Capital Gains Tax rates of 10% and 20% introduced for disposals on or after 6 April 2016 do not apply to transactions involving Residential property or carried interest. Capital Gains Tax rates for these transactions remain at 18% and 28%.
Annual exemption
- **Finance Act 2021 froze the annual exemption at £12,300 for individuals and £6,150 for most trusts until April 2026.
Special cases
- Bitcoin and other cryptocurrencies and crypto-asset gains are subject to Capital Gains Tax, if held as investments by individuals. See How are bitcoin, cryptocurrency or cryptocurrency assets taxed?
- Regular trading in cryptocurrency may be regarded as a trading activity and not as gambling, if the badges of trade are met, see Badges of trade: Are you trading or not.
- Since April 2015, non-UK residents have to pay Capital Gains Tax on gains realised on UK residential property. The gain taxable is restricted to any growth from the April 2015 value. Alternatively, the seller can elect to pay on a time apportionment basis if doing so would be beneficial. For example: where Private Residence Relief (PRR) would be available. See Non-resident Capital Gains Tax: UK property. Don’t forget the 60-day reporting requirement which was extended from 30 days from 27 October 2021.
- Since April 2019, non-UK residents have paid Capital Gains Tax on gains realised on UK land and property (both commercial and residential).
- Executors/estates pay Capital Gains Tax at the higher rates of 20% and 28%.
If you need to discuss your needs or would like to ask a question, contact the Robinsons Team.
*Credit: www.rossmartin.co.uk
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