Capital Gains Tax
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit you make when you sell or dispose of an asset that has increased in value. It is the gain you make that is taxed, not the sale proceeds.
Rates of Capital Gains Tax
The rate of CGT you pay depends on your total taxable income. The rates for the 2024 to 2025 tax year are as follows:
- Basic rate: 10%
- Higher rate: 20%
If your total taxable income is less than the basic rate band (£37,700 for the 2024 to 2025 tax year), you will pay CGT at the basic rate of 10%. If your total taxable income is higher than the basic rate band, you will pay CGT at the higher rate of 20%.
Capital Gains Tax Allowance
You are entitled to a capital gains tax allowance of £12,300 in the 2024 to 2025 tax year. This allowance means that you can make a profit of up to £12,300 on the sale of assets without paying any CGT.
Example
Let's say you sell a share for £20,000 that you originally bought for £10,000. Your profit on the sale is £10,000. If your total taxable income is £30,000, you will pay CGT at the basic rate of 10%. Your CGT liability will be £1,000 (10% of £10,000).
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