- The set off of the brought forward capital losses is restricted to £7,000 (17,600 – 10,600) so that chargeable gains are reduced to the amount of the annual exempt amount.
- Nim therefore has capital losses carried forward of £9,700 (16,700 – 7,000).
Rates of CGT
The rate of CGT is linked to the level of a person’s taxable income. Taxable gains are taxed at a lower rate of 18% where they fall within the basic rate tax band of £34,370, and at a higher rate of 28% where they exceed this threshold. Remember that the basic rate band is extended if a person pays personal pension contributions or makes a gift aid donation.
CGT is collected as part of the self-assessment system, and is due in one amount on 31 January following the tax year. Therefore, a CGT liability for the tax year 2012–13 will be payable on 31 January 2014. Payments on account are not required in respect of CGT.
For the tax year 2012–13 Adam has a salary of £40,105, and during the year he made net personal pension contributions of £4,400. On 15 August 2012 Adam sold an antique table and this resulted in a chargeable gain of £17,400.
For the tax year 2012–13 Bee has a trading profit of £58,105. On 20 August 2012 she sold an antique vase and this resulted in a chargeable gain of £18,600.
For the tax year 2012–13 Chester has a salary of £36,105. On 25 August 2012 he sold an antique clock and this resulted in a chargeable gain of £23,800.
Adam’s taxable income is £32,000 (40,105 less the personal allowance of 8,105). His basic rate tax band is extended to £39,870 (34,370 + 5,500 (4,400 x 100/80)), of which £7,870 (39,870 – 32,000) is unused.
Adam’s taxable gain of £6,800 (17,400 less the annual exempt amount of 10,600) is fully within the unused basic rate tax band, so his CGT liability for 2012–13 is therefore £1,224 (6,800 at 18%).
Bee’s taxable income is £50,000 (58,105 – 8,105), so all of her basic rate tax band has been used. The CGT liability for 2012–13 on her taxable gain of £8,000 (18,600 – 10,600) is therefore £2,240 (8,000 at 28%).
Chester’s taxable income is £28,000 (36,105 – 8,105), so £6,370 (34,370 – 28,000) of his basic rate tax band is unused. The CGT liability for 2012–13 on Chester’s taxable gain of £13,200 (23,800 – 10,600) is therefore calculated as follows: