Rates of tax: from 23 June 2010: example of transitional rule: gains accruing before 23 June 2010
An individual realises a chargeable gain of £10,000 in May 2010 and a chargeable gain of £50,000 in November 2010. She has taxable income in 2010-11 of £30,000 after allowances. The annual exempt amount is £10,100 and the basic rate band is £37,400.
The gain of £10,000 is liable to be taxed at 18%.
The annual exempt amount is set off in the way that is most beneficial, see CG18000. This means setting it off against the gain of £50,000 that could otherwise be taxed at 28%. The amount of that gain chargeable to Capital Gains Tax is reduced to £39,900 (£50,000 less £10,100).
The amount of the basic rate band that is available to set off against gains is £7,400 (£37,400 less £30,000).
The basic rate band is used against the net gain of £39,900, so that £7,400 is taxed at 18%. The gain of £10,000 is not taken into account.
The amount of the gain that is taxed at 28% is £32,500 (£39,900 less £7,400).
So the Capital Gains Tax payable is £12,232 (£32,500 at 28% plus £10,000 and £7,400 at 18%).