Practical tax tips to guide you through the tax system and help you plan to minimise your liability.
Please use the guide to help you identify planning opportunities, pitfalls to avoid and areas where you may need to take action and then contact us for further advice.
The rules, rates and allowances in this guide relate to the 2024/25 tax year and these may be different for other tax years.
Disposals and capital gains tax
Making the most of your investments requires some understanding that CGT arises on the sale of most assets and, subject to various reliefs and exemptions, is payable on the difference between the sale proceeds and the original cost. Where property has been improved then these capital costs may be available to reduce the value of the gain.
The disposal of your main residence does not usually result in a chargeable gain.
The CGT annual exemption results in the first £3,000 of gains for 2024/25 being tax free.
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The amount of the annual exemption is reduced from £6,000 to £3,000 from 2024/25. Plan disposals to ensure reliefs are used where available to minimise chargeable gains. Consider transferring assets to spouses to take advantage of unused exemptions. |
In general CGT is payable at 10% where total taxable gains and income, after taking into account all allowable deductions are less than the income tax basic rate band. CGT is payable at 20% on gains, or any parts of gains, above this limit. However, higher rates (18% and 24%) apply for chargeable gains on residential property that do not qualify for private residence relief.
Reporting of CGT
For non-residential property disposals, these can be reported on the self assessment tax return or via a ‘real-time return’ if they are not otherwise required to submit a tax return. Payment of CGT is due by 31 January following the tax year of the disposal.
CGT on residential property disposals must be reported and a ‘best estimate’ payment of account made within 60 days of completion of sale.
Business Asset Disposal Relief
Business Asset Disposal Relief (BADR) may be available on the first £1 million gains from the disposal of certain businesses during an individual’s lifetime. Qualifying gains are taxed at a 10% rate of tax. Qualifying business disposals include:
- qualifying shareholdings in a trading company (broadly where an employee or office holder owns over 5% of shares and voting rights)
- the whole or part of an unincorporated business
- the disposal of assets on cessation of a business.
There needs to be a qualifying period of ownership of two years up to the date of disposal.
Where an individual makes a qualifying business disposal, relief may also be available on an ‘associated disposal’. An ‘associated disposal’ is a disposal of an asset which is used in a qualifying company of the individual or used in a partnership where the individual is a partner.
The rules on qualifying disposals, particularly in relation to qualifying shareholdings, can be complex. Please do get in touch if you would like to discuss whether BADR might be available or how to meet the requirements.
Investors’ Relief
A 10% CGT rate applies to external investors (i.e. not employees or officers of the company) in unlisted trading companies. Conditions apply:
- shares must be newly issued and subscribed for by the individual for new consideration
- be in an unlisted trading company, or an unlisted holding company of a trading group
- have been issued by the company on or after 17 March 2016
- have been held continuously for a period of three years before the disposal.
An individual’s gains for Investors’ Relief will be subject to a lifetime cap of £10 million.
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
