- The set off of the brought forward capital losses is restricted to £6,900 (18,000 – 11,100) so that chargeable gains are reduced to the amount of the annual exempt amount.
- Nim therefore has capital losses carried forward of £9,800 (16,700 – 6,900).
Rates of capital gains tax
The rate of CGT is linked to the level of a person’s taxable income. Taxable gains are taxed at a lower rate of 10% where they fall within the basic rate tax band of £32,000, and at a higher rate of 20% where they exceed this threshold.
However, for chargeable gains arising from the disposal of residential property, the lower rate is 18% and the higher rate is 28%. These residential property rates apply where a gain arising from the disposal of residential property is not fully covered by the principal private residence exemption (see later in this article).
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 2016–17 will be payable on 31 January 2018. Payments on account are not required in respect of CGT.
Example 5
For the tax year 2016–17, Adam has a salary of £41,000, and during the year he made net personal pension contributions of £4,400. On 15 June 2016, Adam sold an antique table and this resulted in a chargeable gain of £17,600.
For the tax year 2016–17, Bee has a trading profit of £60,000. On 20 August 2016, she sold an antique vase and this resulted in a chargeable gain of £19,100.
For the tax year 2016–17, Chester has a salary of £37,000. On 25 October 2016, he sold a residential property and this resulted in a chargeable gain of £45,900.
Adam
Adam’s taxable income is £30,000 (41,000 less the personal allowance of 11,000). His basic rate tax band is extended to £37,500 (32,000 + 5,500 (4,400 x 100/80)), of which £7,500 (37,500 – 30,000) is unused.
Adam’s taxable gain of £6,500 (17,600 less the annual exempt amount of 11,100) is fully within the unused basic rate tax band, so his CGT liability for 2016–17 is therefore £650 (6,500 at 10%).
Bee
Bee’s taxable income is £49,000 (60,000 – 11,000), so all of her basic rate tax band has been used. The CGT liability for 2016–17 on her taxable gain of £8,000 (19,100 – 11,100) is therefore £1,600 (8,000 at 20%).
Chester
Chester’s taxable income is £26,000 (37,000 – 11,000), so £6,000 (32,000 – 26,000) of his basic rate tax band is unused. The CGT liability for 2016–17 on Chester’s taxable gain of £34,800 (45,900 – 11,100) is therefore: