Capital Gains Tax
The annual exempt amount (AEA) is £3,000 for 2024/25 and will be unchanged in 2025/26. Gains above this level are taxed as follows:
- 10% if the gains qualify for Business Asset Disposal Relief (BADR) or Investors’ Relief, up to a lifetime limit of £1 million of qualifying gains;
- 18% if the gains fall within any unused basic rate band; and
- 24% for gains above the basic rate band (except receipts of carried interest, where the rate is 28%).
Note that, for disposals before 30 October 2024:
- gains arising on assets other than residential property and receipts of carried interest were taxed at 10% (within the basic rate band) and 20% (above the basic rate band);
- the lifetime limit for Investors’ Relief was £10m.
Assets transferred between married couples or civil partners do not normally give rise to a CGT charge; instead, the recipient takes over the CGT cost of the donor. This means that, when the asset is eventually sold by the recipient, the gain or loss will reflect the combined ownership period.
Gifts to other family members will produce capital gains or losses, using the market value at the time of the gift as deemed proceeds. However, where the asset is a qualifying business asset (e.g. unquoted trading company shares), a joint ‘holdover relief’ election will enable any gain to be deferred.
Non-residents are not generally subject to UK CGT. There is an exception to this rule, however, for disposals of UK immoveable property (i.e. land and buildings) and certain indirect interests in UK immoveable property.
Planning points
- The AEA cannot be carried forward or transferred to a spouse, so where possible aim to make disposals before 6 April 2025 to utilise this year’s AEA.
- Consider transferring assets (wholly or partly) to your spouse or civil partner, to utilise their AEA or capital losses on a subsequent disposal. Such transfers must be made outright and without preconditions to be effective for tax purposes.
- Where disposals of assets are eligible for BADR or Investors’ Relief, consider bringing forward disposals to this current tax year, as the tax rate is going up to 14% in 2025/26.
- Consider carefully when you will make any disposal, as the timing will determine when any CGT is due and may affect the amount of CGT payable.
Example – David
David is a basic rate taxpayer (with £7,000 of basic rate band unused) in 2024/25 but expects to be a higher rate taxpayer in 2025/26. His sole disposal in 2024/25 of some nonresidential land takes place on 31 March 2025 and realises a capital gain of £15,000.
- His taxable gain (i.e. after AEA) is £12,000 and his CGT liability will be £2,460 [(£7,000 @ 18%) + (£5,000 @ 24%)].
- This would be payable on 31 January 2026.
If, instead, the disposal is made early in 2025/26 (say, on 30 April 2025):
- His taxable gain (i.e. after AEA) is still £12,000 but his CGT liability will be fully at 24%, i.e. £2,880.
- This would be payable on 31 January 2027.