One of the surprising announcements in the recent budget was the easing of capital gains tax (CGT) rates.
From April 2016, the new rates published by HMRC are:
Changes to rates.
Legislation will be introduced in Finance Bill 2016 to reduce the rate of CGT charged on most gains accruing to basic rate taxpayers from 18% to 10%.
For higher rate taxpayers, or those whose gains exceed the unused part of their basic rate tax band, the rate of CGT charged on most gains will be reduced from 28% to 20%.
The 28% and 18% rates will continue to apply for gains accruing on the disposal of interests in residential properties that do not qualify for Private Residence Relief, and the receipt of carried interest.
The rate of CGT charged on Annual Tax on Enveloped Dwellings related chargeable gains will continue to be 28%. These changes will have effect from 6 April 2016.
The annual exemption for CGT continues to be £11,100. This is the amount of gains an individual can make and still pay no CGT. Married couples both qualify for the annual exemption.
The lower 10% rate will apply to gains, that when added to your taxable income, still fall within the basic rate band. Once the basic rate band is exceeded any gains that fall into the higher rate band will be taxed at the higher 20% rate.
The 18% and 28% higher rates will continue to be applied to gains on the disposal of residential property that do not qualify as a principal private residence.