Capital Gains Tax allowance

Capital Gains Tax (CGT) allowance is a tax-free allowance given to individuals in the UK for the profit. They make when disposing of certain assets. Please note that tax laws are subject to change. So it is essential to verify with up-to-date sources. As of my last update, here’s what you need to know:

For the tax year 2023/2024 (running from 6th April 2023 to 5th April 2024), the Capital Gains Tax allowance was £12,300 to £6,000. This means that individuals could realise gains up to this amount without incurring any CGT liability.

For couples who are married or in a civil partnership. They each have their own separate CGT allowance. A couple could realise gains up to twice the individual allowance (£24,600 for the tax year 2023/2024) without paying CGT.

It is important to remember that gains above the CGT allowance may be subject to tax at the applicable rates. It is depending on the type of asset and the individual’s overall income.

We recommend checking with an official and up-to-date source or consulting with a tax accountant. They will advice for the most current information regarding the Capital Gains Tax allowance in the UK.

What is Capital Gain Tax UK? 

Capital Gain Tax UK (CGT) is a tax levied on the profits or gains made by individuals or businesses. It is happen, when they sell or dispose of certain assets. These assets can include properties, investments, businesses, stocks, bonds, precious metals, and other valuable items. The tax is applied to the difference between the purchase price (or “cost basis”) of the asset and the selling price. It is commonly referred to as the capital gain.

Key points about Capital Gains Tax:

Taxable events: CGT is triggered when there is a disposal of an asset. A disposal can occur through selling, gifting, transferring, or exchanging the asset.

Cost basis: The cost basis of the asset is the original price paid for acquiring it. It may also include additional expenses incurred in purchasing, maintaining, or improving the asset. The cost basis is subtracted from the selling price to calculate the capital gain.

Annual exemption: Many countries, including the United Kingdom, offer a tax-free allowance known as the CGT allowance or exemption. Up to this threshold, individuals are not liable to pay Capital Gains Tax on the gains they make.

Rates: Capital Gains Tax rate can vary depending on the individual’s total income and the type of asset sold. In some countries, the tax rates for capital gains may be different from the rates for regular income, typically lower.

Reporting: Taxpayers are usually required to report capital gains and losses on their annual tax returns. Proper record-keeping and accurate reporting are crucial to ensure compliance with tax regulations.

Exemptions and reliefs

Some assets may be exempt from Capital Gains Tax, or certain reliefs and personal tax allowance. It may apply to reduce the tax liability in specific circumstances. These can include Principal Private Residence Relief (PPR) for primary homes, Entrepreneur’s Relief for qualifying business disposals, and more.

Double taxation agreements: In cases where an individual is subject to CGT in multiple jurisdictions. Double taxation agreements may be in place to prevent the same gains from being taxed twice.

It is crucial to consult with a tax professional or relevant tax authority to ensure compliance with the most current rules and regulations related to Capital Gains Tax.