Rates & Annual Tax-Free Allowances

Capital Gains Tax

If you sell or dispose of a business asset, you’ll need to pay Corporation Tax on any profits (or ‘chargeable gains’).

When working out your chargeable gain, you can use Indexation Allowance Rates to reflect the increase in value of the asset between the time it was acquired and 31 December 2017. From 1 January 2018 Indexation Allowance is frozen. Where assets acquired before 1 January 2018 are disposed of on or after that date, the Indexation Allowance will be calculated using the Retail Prices Index or factor for December 2017, irrespective of the date of disposal of the asset.

Tax-free allowances for capital gains tax

The annual tax-free allowance (known as the Annual Exempt Amount) allows you to make a certain amount of gains each year before you have to pay tax. Nearly everyone who is liable to Capital Gains Tax gets this tax-free allowance.

There’s one annual exempt amount for:

  • most individuals who live in the UK

  • executors or personal representatives of a deceased person’s estate

  • trustees for disabled people

A lower rate of annual exempt amount applies for most other trustees.

From 2015 to 2016, non-residents who dispose of a UK residential property are liable to Capital Gains Tax and, in most cases, can claim the annual exempt amount in the same way as UK residents. This is not available to companies who dispose of a UK residential property, as they may be able to claim other allowances.

Annual exempt amount limits

You can use your annual exempt amount against the gains charged at the highest rates to reduce the amount of tax you owe.

Annual exempt amount limits

Executors and personal representatives

If you’re acting as an executor or personal representative for a deceased person’s estate, you may get the full annual exempt amount during the administration period.

The administration period is the time it takes to settle the deceased person’s affairs, from the day after the death until the date everything has been passed on to beneficiaries.

You’re entitled to the annual exempt amount for the tax year in which the death occurred and the following 2 tax years. This means one annual exempt amount against gains in each of those years. After that there’s no tax-free allowance against gains during the administration period.

Find out more about dealing with the estate of someone who’s died.

Trustees for disabled people

If you’re acting as a trustee for a disabled person use the ‘Individuals, personal representatives and trustees for disabled people’ rates shown in the annual exempt amount table.

For Capital Gains Tax purposes, a disabled person is a person who has mental health problems, or gets the middle or higher rate of Attendance Allowance or Disability Living Allowance.

Find out more about Capital Gains Tax and trusts.

If you’re non-domiciled in the UK

You will not get the annual exempt amount if you’re non-domiciled in the UK and you’ve claimed the remittance basis of taxation on your foreign income and gains.

You may be non-domiciled in the UK if you were born in another country and intend to return there, for example.

You may have claimed the remittance basis if you have income and gains from abroad and have decided that it’s beneficial to be taxed on the foreign income and gains that you bring into the UK, rather than on all income and gains that arise.

Issues of domicile and tax on foreign gains are complicated. A lot depends on the facts of each case.

To find out more read Residence, domicile and the remittance basis: RDR1, and contact HMRC if you have any questions.

Rates for capital gains tax

The Capital Gains Tax rate you use depends on the total amount of your taxable income, so work that out first.

6 April 2017 onwards

The following Capital Gains Tax rates apply:

  • 10% and 20% tax rates for individuals (not including residential property and carried interest)

  • 18% and 28% tax rates for individuals for residential property and carried interest

  • 20% for trustees or for personal representatives of someone who has died (not including residential property)

  • 28% for trustees or for personal representatives of someone who has died for disposals of residential property

  • 10% for gains qualifying for Business Asset Disposal Relief — previously known as Entrepreneurs Relief

  • 28% for Capital Gains Tax on property where the Annual Tax on Enveloped Dwellings is paid, annual exempt amount is not applicable

  • 20% for companies (non-resident Capital Gains Tax on the disposal of a UK residential property)

This information and more for previous years can be found on the Gov.uk website, where you can find in-depth advice about tax rates and guidance.