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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
Updated
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Rates of tax: from 23 June 2010 onwards: example

Example 1

In August 2010 an individual realises a chargeable gain of £30,000. She has taxable income in 2010-11 of £20,000 after allowances. The annual exempt amount is £10,100 and the basic rate band limit is £37,400.

The amount of the gain chargeable to Capital Gains Tax is £19,900 (£30,000 less £10,100).

The amount of the basic rate band that can be used against that gain is £17,400 (£37,400 less £20,000).

The amount of the gain that is chargeable at 28% is £2,500 (£19,900 less £17,400).

So the amount of Capital Gains Tax payable is £3,832 (£17,400 at 18% plus £2,500 at 28%).

 

Example 2

In 2016-17 an individual  realises a chargeable gain of £16,100 on residential property and a £25,000 chargeable gain on shares. She has £3,000 of her basic rate band available.

The Annual Exempt Amount is first used against the gains on residential property so the gains are £5,000 on residential property potentially chargeable at 18% and 28%.

The chargeable gain on the shares is potentially chargeable at 10% and 20%.

The rate allocation could be:

          ((3,000 x 10%) + (22,000 x 20%) + (5,000 x 28%)) = £6,100.00

    or   ((3,000 x 18%) + (2,000 x 28%) + (25,000 x 20%)) = £6,100.00

In this example the allocation of rates does not impact the overall liability but could be relevant in other circumstances e.g. if foreign tax credit relief was due see CG14380 onwards.

 

There is further guidance at CG21600 onwards to illustrate how losses and the annual exempt amount are set off in the most beneficial way in order to minimise the amount of Capital Gains Tax payable.