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Capital Gains Tax Allowances

Capital Gains Tax allowances can be used to help reduce the burden on your finances that might be imposed by taxation.  Capital Gains Tax is levied in the following way:

  • Capital gains are the increases in value from the original worth on any capital assets that you dispose of.
  • Disposal includes giving away of assets for free – you still have to pay tax on them.
  • The total gains are added to your taxable income for the year, and then taxed as the top portion of that income – so if the top of your income falls into the 20% tax band, then your capital gains may be taxed at a 20% rate.

However, Capital Gains Tax allowances reduce the amount of gains that are subject to tax:

  • The Annual Exempt Amount (AEA) is £9,200.  Thus the first £9,200 of your capital gains each year is not subject to tax.
  • If you are married or in a civil partnership then both you and your spouse or partner benefit from your own AEA, which can help through joint ownership of an asset that is increasing in worth.
  • Capital losses can be set against capital gains to reduce the taxable amount.
  • Taper relief lowers payable tax on assets depending on how long you have owned them.
  • There are many exemptions for assets such as your chattels, car, and main residence that can help to further reduce the tax burden.

For more advice and information on Capital Gains Tax allowances, check out our Fair Investment Tax Bookshop - stocked with useful guides and software.

Disclaimer: Every effort is made to keep the site accurate, however please bear in mind that tax rates are subject to change. If you require tax advice you should speak to a professional tax adviser.