Capital Gains Tax Rates and Annual Tax-Free Allowances

Each tax year you have an annual tax-free allowance – known as the ‘Annual Exempt Amount’. You only pay tax on total net gains above this amount, using the Capital Gains Tax rate for that tax year. You may qualify for Indexation Allowance for certain disposals before 6 April 2008.

Annual tax-free allowances

Nearly everyone who lives in the UK will get the Annual Exempt Amount. This allows you to receive some normally taxable gains ‘tax-free’. There are different Annual Exempt Amounts for individuals (including personal representatives) and most trustees. The amounts are set for each tax year.

Annual Exempt Amounts for individuals and trustees 

Personal representatives get the Annual Exempt Amount for the tax year in which an individual dies and the next two tax years.

For 2008-09 and later years, you don’t get the Annual Exempt Amount if you are not domiciled in the UK and claim the special ‘remittance’ basis of tax - which means you only pay Capital Gains Tax on gains you bring into the UK and gains on assets located in the UK.

Tax rates and thresholds

2008-09 & 2009-10

There is a single rate of Capital Gains Tax of 18 per cent for individuals, trustees and personal representatives.

2007-08

The rates of Capital Gains Tax for individuals for 2007-08 are 10 per cent, 20 per cent and 40 per cent depending on your income.

Indexation Allowance

You will qualify for Indexation Allowance if you owned your asset on 31 March 1998 and disposed of it before 6 April 2008.

It works by taking account of inflation between March 1982 and April 1998 on the cost of the asset, including incidental purchase costs. From April 1998, Indexation Allowance was replaced by Taper Relief. Indexation can reduce your gains to nil, but it cannot create or increase a loss.

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