Capital Gains Tax allowance

Individuals make capital gains on selling their assets above the purchase price. These gains are subject to tax, known as the capital gains tax. Like personal allowance for income tax, an amount is set to be tax-free and is known as annual exempt amount also refers to capital gains tax allowance

The tax allowance on capital gains in Tax Year 2020-21 is £ 12,300 or £6,150 for trusts. Any aggregated gains above the allowance are subject to tax at the rate applicable depending upon an individual’s income tax profile. Gains of a basic taxpayer are subject to a lower rate and a high rate taxpayer at a higher rate.   

You do not pay it on:  

Not all gains are subject to capital gains tax; a few are exempt like: 

  • Personal possessions worth £6,000 or less 
  • Property that is your main home 
  • Winning lotteries, bets, or pools 
  • Yields held in ISAs or PEPs 
  • Premium Bonds and UK government gilts 
  • Improvements or profits made by investing in an EIS 

Other reliefs available 

Beside annual exemption, there are a few other reliefs available. These reliefs: 

  • reduce the amounts of gains subject to tax, or  
  • contribute through a reduction in the applicable tax, or  
  • defer the gain for later years.  

Examples are: 

  • Principal Private Residence Relief which reduces the capital gain on the property. 
  • Business Asset Disposal Relief (known as the Entrepreneurs relief before 06 April 2020) reduces the tax rate charged to gains from a business sale. 
  • Roll Over relief which defers the gain being taxed. 
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