CGT RATE BEFORE 6 APRIL 2016: You need to inform HMRC when you have finished working out Capital Gains Tax using the tax return online form or the paper version.
Her Majesty’s Revenue and Customs then calculate the total amount that you owe in Capital Gains Tax. They will base the amount on the rate for that particular tax year.
An exception to this rule applies for non-residents who sell a UK residential property.
Non-residents must inform HMRC within 30 days of the property conveyance e.g. If the conveyance takes place on the 1st of March, you must report the sale (or disposal) to Her Majesty’s Revenue and Customs before the 31st of March.
The change in Capital Gains Tax rate took effect from the 6th of April 2016.
Higher Rate Income Tax (tax rate 2015/16)
Those who are an additional or higher rate taxpayer need to pay 28% on any Capital Gains realised during the financial tax year 6th of April 2015 to the 5th of April 2016.
Basic Rate Income Tax (tax rate 2015/16)
If you pay basic rate Income Tax the amount of CGT depends on your total profit (gain) and your taxable income. This could be a rate of 18% or 28% payable tax.
- You need to work out your normal Taxable Income (income less your Personal Tax Allowance) and any entitled Income Tax reliefs.
- Calculate your total taxable gains (profits).
- Deduct your Tax-Free allowance.
- Add this to your taxable income.
- You will pay 18% Capital Gains Tax if the amount is within the Basic Income Tax band for 2015 to 2016 tax year. Any amount above this has a 28% tax rate.
An Example:
- Income is £45,000
- Personal Allowance is £10,600
- Income Tax Reliefs total £4,400
- Taxable Gains £12,600
- Tax Free Allowance £11,100
Your taxable income is your Income less your Personal Allowance less any Income Tax relief [£40,000 – £10,600 – £4,400 = £25,000]
Your Taxable Gain is your gains (profit) less the Tax-Free allowance [£12,600 – £11,100 = £1,500]
Add your taxable income to your taxable gain [£25,000 + £1,500 = £26,500]
The basic rate tax band, for 2015 to 2016, is £31,785. At £26,500 you are below the basic tax band rate, therefore, you pay 18% on your taxable gain.
Therefore, your Capital Gains Tax payable in this example is £1,500 x 18% = £270.
CGT Rate for Trustee or Business
For someone who has passed away, their personal representative or trustees will pay 28% Capital Gains Tax, either from the estate or from the trust. If you are a partnership or sole trader and your gains qualify for Business Asset Disposal Relief you will pay 10% Capital Gains tax.