Tax and NI

14. Capital Gains

Capital gains tax (CGT) is a tax on successful investments, such as those in property and shares. If you sell something for more than you paid for it, CGT may be payable.

14.1 Capital gains tax is generally paid at a flat rate of 18 per cent on all gains (see 3).

• Capital gains are added to any other income, to determine what the top rate should be.
• Gains falling within the middle rate band are charged at 20 per cent, rather than 22 per cent.
• The first £9,600 of capital gain each year is tax free. A husband, wife or civil partner can each claim this allowance.
• CGT is payable on 31 January following the end of the tax year in which the gain is made.

14.2 Limited companies pay corporation tax on any capital gain.

• Capital gains are treated as part of the company's taxable profit.

14.3 The self-employed, like other individuals, pay CGT at their top rate of income tax.

14.4 CGT exemptions include your gains in ISAs and increases in the value of your principal private residence and private cars.

• If you work from home - and have not claimed any part of your mortgage payments as a business expense - there is usually no CGT on any profits made from the sale of your house.
• Under certain conditions, some investment vehicles, life assurance policies and charitable gifts can also be exempt.

14.5 Capital losses can be set against capital gains from the same tax year and can then be carried forward against future capital gains.

14.6 Individuals can claim entrepreneurs' relief on the first £1 million of gains made on the sale of a business or its assets.

14.7

• The relief gives an effective rate of ten per cent on gains up to £1 million.
• Claims can be made on more than one occasion up to the £1 million lifetime limit.
• Gains over £1 million are charged at a flat rate of 18 per cent.

14.8 Payment of some CGT can be deferred.

• You can get 'rollover relief' if you sell a building from which you trade (or certain other types of asset), and use the money to buy another such building (or asset).
• You can get 'reinvestment relief' if you reinvest the gain in qualifying shares in certain types of companies under the Enterprise Investment Scheme.