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Capital Gains Tax Formula

The Capital Gains Tax formula is the method by which the values of your capital gains are assessed for taxation.  Capital gains are profits made from disposing of assets which have increased in value since you first acquired them, and the formula for calculating just how much tax you may be liable for on your gains is simple at its core but is surrounded by a morass of exemptions, conditions and laws that can make the process very complex.

The simple heart of the Capital Gains Tax formula is:

  • The sum of your capital gains for the tax year is added together.  Capital losses are factored in to this, and thus can reduce your taxable gains.
  • The first £9,200 counts towards your annual exemption amount, and is not subject to Capital Gains Tax.
  • Gains in excess of this amount are added to your taxable income and subject to income tax as if the top portion of this sum – so at a rate of 10%, 20% or 40% depending on the size of your taxable income.

There are a myriad of additional exemptions that can affect the Capital Gains Tax formula, such as taper relief which reduces the tax payable on the gains from an asset depending on how long the asset had been under your ownership.  For further advice and information, take a look at our Fair Investment Tax Bookshop, which is stocked with useful guides and software to help make the Capital Gains Tax formula easy to solve.

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.