Changes to capital gains tax (CGT) rates was one of the biggest announcements of Budget 2016. Now that the 10% and 20% rates are in force we consider whether the changes affect you and your business.
We briefly go over the new rates and provide examples on how it may apply to your income.
New rates
CGT is charged on the profit when an asset is sold.
Most individuals have a CGT annual allowance of £11,100. This means they can make up to £11,100 in gains without paying tax. Any gains above the allowance will be subject to CGT.
The following CGT rates now apply for both basic and higher rate taxpayers disposing of an asset:
| Type of taxpayer | Allowance | 2015/16 rate | 2016/17 rate |
| Basic rate taxpayer | £11,100 | 18% | 10% |
| Higher rate taxpayer | £11,100 | 28% | 20% |
CGT rates when you sell residential property that is not your main home remain at the previous rate at:
- 18% for basic rate taxpayers
- 28% for higher rate taxpayers.
2015/16 vs 2016/17
Your total taxable income is £20,000 and your total taxable gains are £12,100.
The £11,100 tax-free is deducted from your gains, leaving £1,000 to pay on tax. As a basic rate taxpayer your CGT rate is 10% so the total tax bill will be £100. Tax on the same gains made in 2015/16 would be £180 (or 18%).
Who will benefit?
Although most individuals will benefit from the lower rates, there are some instances where the previous rates still apply. In particular residential landlords and those selling second homes may have to pay 18% or 28% on gains above the annual allowance when they sell property.
Find out how much CGT you need to pay for 2016/17 with our tax calculator.
Contact us
If there is a specific area you would like us to help you with, contact us by completing the form on our website. Alternatively you can call us on 020 8977 0905 (Hampton Office) or 01932 855644 (Weybridge Office) to speak to an adviser.
