How much CGT will I pay?
Capital gains tax (CGT) has become more complicated following the Budget on 22 June. For gains made since that date, only basic rate taxpayers pay CGT at 18%. Everyone else will pay CGT at 28%, although a 10% rate can apply where the disposal qualifies for entrepreneurs’ relief. These multiple rates mean you need to break CGT computations into three steps:
Step 1
Identify the date on which each disposal took place. Then allocate the gains realised to the periods 6 April to 22 June 2010, and 23 June 2010 to 5 April 2011.
Where a sale is made by contract, the normal disposal date is the date unconditional contracts are exchanged, not the completion date. For conditional contracts the disposal date is when the condition is satisfied or lapses. Different disposal dates apply in circumstances where a deemed gain may arise, so if you have made some unusual transactions please get in touch with us.
Step 2
Estimate your net taxable income for 2010/11. Include your taxable income for the full tax year, deduct tax allowable expenses and your tax-free allowances. If your net income exceeds £37,400, the gains you make after 22 June 2010 will be taxed at 28%.
If your net taxable income is less than £37,400, deduct your net income from £37,400. The difference is the amount of your post-22 June gains that are taxed at 18%. Any balance of your post-22 June gains will be taxed at 28%. However, these amounts are calculated before deducting capital losses, your annual exemption or other CGT reliefs.
Step 3
If you have gains taxed at both 18% and 28%, you can choose to set your annual exemption and any capital losses against the gains taxed at the higher rate.