Capital Gains Tax Rates Explained
This section explains the Capital Gains Tax rates for gains made after the new tax rules. The current CGT rate has full effect from the 6th of April 2018.
RATE OF TAX ON GAINS: You will need to inform HMRC when you have finished working out if you need to pay Capital Gains Tax.
You can report any amount that you need to pay using the new 'real time' Capital Gains Tax service or in your annual Self Assessment tax return.
Her Majesty's Revenue and Customs then calculate the total amount that you owe in Capital Gains Tax. They will base it on the tax rate for that particular year.
An exception to this rule applies for non-residents who sell a UK residential property. You would pay a different rate of tax on the gains.
Non-residents must inform HMRC within 30 days of the property conveyance. For example, if a conveyance takes place on the 1st of March, you must report the sale (or disposal) to HMRC before the 31st of March.
The rules on tax for gains on general assets are different to those on residential property. As a general rule you do not get taxed when you sell your main home.
Capital Gain Rates 2018/19
Higher Rate Income Tax
The Capital Gains Tax rate for an additional or higher rate taxpayer from the 6th of April is:
- 28% on gains realised from residential property.
- 20% on gains made from other chargeable assets.
Basic Rate Income Tax
If you are a basic rate taxpayer, the rate you pay depends on several factors. The size of the gain, your taxable income, and whether your gain is from residential property or other assets will have an effect.
- You need to work out your usual 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 10% Capital Gains Tax (or 18% on residential property) if the amount is within the basic Income Tax band for 2018 to 2019 tax year. Any amount above this has a 20% (or 28% on residential property) tax.
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An Example: Your taxable income (earnings minus Personal Allowance and any Income Tax reliefs) is £20,000. Your taxable gains are £12,300 which are not from a residential property.
Deduct the tax-free allowance from the taxable gain. In the 2018 to 2019 tax year the allowance is £11,700. That will leave £600 to pay tax on.
Add this to the taxable income. The combined amount of £20,600 is less than £45,000 (basic rate band for 2018/2019 tax year). Thus, you pay Capital Gains Tax at 10%.
In this example you would pay £60 in Capital Gains Tax.
Gains from Residential Property as well as Other Assets
You can use tax-free allowances against gains that would get charged at the highest rates (e.g. paying 28% tax).
CGT Rate for Trustee or Business
In cases where someone has died, their personal representative or trustees will pay Capital Gains Tax. It will either come from the estate or the trust at a CGT rate of:
- 28% on residential property
- 20% on other chargeable assets
If you are in a partnership or a sole trader with gains that qualify for Entrepreneurs' Relief you will pay 10% Capital Gains Tax.
Note: Another section explains CGT rates for gains made before the new tax rules took effect beginning the 6th of April 2016.
Current Capital Gains Tax Rates in the United Kingdom