Capital Gains Tax (CGT) is applicable to individuals, trustees, and personal representatives (PRs), while companies are subject to corporation tax on their capital gains. Individuals, trustees, and PRs benefit from annual tax-free allowances, known as the 'annual exempt amount,' whereas companies do not receive such an allowance.
For many individuals, net gains are combined with their total taxable income to determine the applicable tax rate. The standard rate is applied only to net gains that do not exceed the basic rate band when added to total taxable income.
Gains eligible for Investors' Relief incur a 10% tax rate for the first £10 million of qualifying gains. Similarly, gains qualifying for Business Asset Disposal Relief are taxed at 10% for the initial £1 million.
Disposing of an asset does not just mean selling it. Disposal also includes giving an asset away as a gift, swapping it, or receiving insurance payouts/compensation for the asset.
Capital Gains Tax rates in the UK
In the UK, capital gains tax rates can vary depending on your personal income tax rate and the type of asset that is being disposed of.
| Individuals | 2024-25 |
| Exemption | £3,000 |
| Standard rate | 10% |
| Higher rate | 20% |
The higher rate applies to higher rate and additional rate taxpayers.
Additionally, higher rates of 18% and 24% may apply to the disposal of certain residential property.
| Trusts | 2024-25 |
| Exemption | £1,500 |
| Rate | 20% |
Reporting and paying Capital Gains Tax
The reporting of a disposal and payment of any resulting CGT liability will depend on the asset sold.
Property
UK resident individuals must report and pay any CGT on the disposal of residential property that is not their home within 60 days of the disposal.
What is the Capital Gains Tax Allowance in the UK?
Like Income Tax, there is a Capital Gains Tax allowance. This means an individual will not have to pay CGT until their total gains exceed a certain value, known as the Annual Exempt Amount (AEA). See the table above for more information.
If you are non-domiciled in the UK and have claimed the remittance basis of taxation, you will not qualify for the AEA. If this applies to you, we encourage you to book a consultation with our International Tax team for advice.
Capital Gains Tax reliefs
Several Capital Gains Tax reliefs are available to individuals and businesses in the UK. These reliefs can be complex and depend on a wide range of factors.
We strongly advise you to speak to a qualified tax adviser or accountant if you have specific questions about CGT reliefs or if you do not know which may apply to you. You can learn more about how to reduce your Capital Gains Tax bill in our dedicated blog.
Business Asset Disposal Relief (“BADR”)
Business Asset Disposal relief allows individuals to pay a reduced CGT rate of 10% on gains made on the sale of a business asset. This can include partial or complete disposal. BADR can only be claimed on gains up to a lifetime limit, currently set at £1m.
Incorporation Relief
Incorporation Relief is available when business assets of an unincorporated business are transferred to a company in return for shares in that company. The benefit is a deferral of the CGT charge.
Gift Hold-Over Relief
When making gifts of chargeable assets, the donor is generally treated as having received disposal proceeds equal to the market value of the asset for CGT purposes. If available, hold-over relief acts to defer all or part of a CGT liability until a later disposal by the recipient of the gift.
Hold-over relief can be claimed either on the transfer of business assets or on gifts to which Inheritance Tax is chargeable.
Business Asset Rollover relief
Business Asset Rollover relief applies when you acquire an asset within 3 years of a previous asset disposal. Both the old and new assets must be qualifying business assets. Similar to Incorporation Relief, the benefit is a deferral of the taxable gain arising when the assets are disposed of or replaced. Exceptions may apply, so we encourage you to seek advice on specific asset types.
Private Residence Relief
When you sell your primary residence, you will normally receive Private Residence Relief. This means that, subject to meeting all the necessary conditions, no CGT will be payable on the sale. The relief is restricted if any part of your home is used for business. Where this applies, you will pay CGT, but only on the part of the home that has been used for business purposes.
David Robinson
As a Tax Partner, I advise clients on all aspects of UK tax, ranging from business taxes, transactions and private client matters, helping to achieve the objectives and aspirations of businesses and their owners.
View my articlesTags: Private Client, Business Taxes
