The annual capital gains tax (CGT) allowance will increase to £11,700 for the 2018/19 tax year.
Announced in the Budget statement, the annual allowance will increase from its current level of £11,300, making it a 3.5% rise.
Capital gains tax is paid on the profit when you sell an asset that has increased in value. It’s the gain you make that’s taxed, not the amount of money you receive. The allowance means that from April 2018 you can have a gain of £11,700 that year before being subject to tax.
While capital gains tax does not apply to a person’s main residence, it is charged on second homes as well as other assets.
For assets held in a trust, the CGT allowance will rise from £5,650 to £5,850 from next year.
‘Married couples have double the allowance’
Sean McCann, chartered financial planner at NFU Mutual, says that transfers between spouses are currently exempt from CGT, meaning a potential £23,400 allowance is on offer next tax year for married couples.
“This extra allowance is a welcome boost for investors and second property owners as it will allow them to keep more of their money when they realise their gains,” he says.
“It will be worth a combined £23,400 for married couples and civil partners who have the advantage of being able to transfer assets between each other without triggering a capital gains tax charge. Both spouse’s annual exempt amounts can be used in full and potential tax bills can be cut further if one of the couple pays a lower rate of tax.”
How much capital gains tax is payable?
In the 2016 Budget, Chancellor George Osborne slashed capital gain tax (CGT) payable on gains from asset sales. The 18% rate previously paid by basic rate taxpayers was reduced to 10% with effect from 6 April 2016, while higher rate taxpayers pay 20% instead of the previous 28%.
If you’re a higher or additional rate taxpayer you’ll pay:
- 28% on your gains from residential property
- 20% on your gains from other chargeable assets.