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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Rates of tax: from 23 June 2010 onwards: example including Entrepreneurs’ Relief

In September 2010 an individual realises a chargeable gain of £20,000. In December 2010 he realises a chargeable gain of £15,000 that qualifies for Entrepreneurs’ Relief, see CG63950+. His taxable income in 2010-11 is £18,000 after allowances. The annual exempt amount is £10,100 and the basic rate band limit is £37,400.

The annual exempt amount is set against the gain of £20,000 because that produces the maximum reduction in the Capital Gains Tax payable, see CG18000. This is because the gain that qualifies for Entrepreneurs’ Relief will be taxed at 10% while the other gain will be taxed at either 18% or 28%. So the gain is reduced to £9,900 (£20,000 less £10,100).

The amount of the basic rate band that can be used against gains is £19,400 (£37,400 less £18,000).

The gain that qualifies for Entrepreneurs’ Relief must be set against the available amount of the basic rate band in priority to other gains. This reduces the amount of the basic rate band available for other gains to £4,400 (£19,400 less £15,000).

The amount of the other gain that is chargeable at 28% is £5,500 (£9,900 less £4,400).

So the amount of Capital Gains Tax payable is £3,832 (£15,000 at 10% plus £4,400 at 18% plus £5,500 at 28%).