Your Capital Gains Tax (CGT) Allowance, also known as your Exemption Limit or Annual Exempt Amount, is the amount of profit you can make on the sale of property or an investment in a given year before you pay Capital Gains Tax on the amount above this figure.
You can find out your personal capital gains amount in a given year by deducting any losses and reliefs from the gains you made, thus uncovering your capital gains profit.
For the current, 2015-16, tax year the tax-free allowance is set at £11,100 for individuals (and trustees of disabled individuals; defined as somebody who has mental health problems or receives middle or higher rate of Attendance Allowance or Disability Living Allowance), and £5,550 for other trustees.
Making Use of Your Capital Gains Tax (CGT) Allowance
As everybody who is liable to pay Capital Gains Tax can receive this allowance, it’s possible for you and your spouse or partner to make effective, legal use of your combined allowances to ensure you pay as little tax on your capital gains as possible by transferring assets between you, or placing them in joint names before an impending sale.
This method is deemed wholly legal by HM Revenue and Customs (HMRC) as couples are often looked upon as a joint unit, despite the fact that each partner receives an individual Capital Gains Tax Allowance.
Another way you can make best use of your allowance, should you be expecting to make a particularly large gain, is to spread the monetary release of this gain over a number of tax years so to make full use of your tax exemption limit, assuming this is an acceptable option for you.
Capital Gains Tax (CGT) Rates
Any capital gains profit you make in a given year that’s over your Capital Gains Tax Allowance will be taxed at the Capital Gains Tax rates for that year.
The rates for the current, 2015-16, tax year haven’t changed since 2013, with the rate you have to use depending on the total amount of taxable income you make in the year in question (including profit from your small business, dividends, and salary payments). These rates are currently:
– 18% or 28% for individuals
– 28% for trustees or representatives of someone who has died
– 10% for capital gains that qualify for Entrepreneurs’ Relief
Experienced Capital Gains Tax (CGT) Accountants
Whether you’re a small to medium-sized business (SME) owner, or you’re looking to sell some property or investments in the near future, consider using our free Capital Gains Tax Calculator to estimate your capital gains liability, once your tax-free allowance has been deducted.
To speak with a professional tax accountant to discuss how to make the most of your (and your spouse/partner’s) Capital Gains Tax Allowance, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.