Tax - Capital gains

CGT is levied on the taxable gains of individuals resident in the UK. Individuals resident outside the UK are not liable to tax in the UK on their capital gains, UK or otherwise, other than in respect of gains on disposals of residential property in the UK made on or after 6 April 2015, of gains on disposals of non-residential property in the UK, and of certain indirect interests in either type of property made on or after 6 April 2019. Companies, including non-UK resident companies with effect from 6 April 2019, pay corporation tax rather than CGT in respect of their gains.

A UK-resident individual who is domiciled outside the UK under the general law and is not deemed to be domiciled in the UK for tax purposes may claim or be automatically entitled to the remittance basis of taxation in relation to his or her foreign gains. Otherwise, UK-resident individuals are taxable on their worldwide capital gains, subject to any double tax treaty relief applicable.

Capital gains realised on the disposal of an asset, which includes a sale or a gift, are taxed as the top slice of income and, in tax year 2020-2021, are levied at a rate of 10 per cent for basic rate taxpayers (18 per cent on upper rate gains, which include carried interest and residential property) and otherwise at 20 per cent (or 28 per cent on upper rate gains). There is an annual exemption from tax on gains up to £12,300 (£6,150 for trustees).

Transfers of assets between spouses or civil partners are not liable to CGT, and neither are disposals of a main residence as a result of principal private residence relief (PPR). PPR may be claimed by UK residents disposing of a UK or non-UK residential property, and non-UK residents disposing of a UK residential property provided that, in either case, the property qualifies as a main residence for the purposes of the relief.

Other CGT deferrals and reliefs may be available, including business assets disposal relief (known as entrepreneurs’ relief prior to 6 April 2020) on the sale of certain business assets owned for at least two years (other than in certain, specific situations), the effect of which is to reduce the rate of tax to 10 per cent on gains up to a lifetime limit of £1 million (reduced from £10 million) for qualifying disposals made on or after 11 March 2020). Similarly, the Finance Act 2016 introduced investors’ relief that reduces the rate of tax to 10 per cent on lifetime gains of up to £10 million. This relief is available on the disposal of ordinary shares in unlisted trading companies by individuals other than officers and employees, or trustees in certain circumstances, and is subject to a three-year ownership period. The shares must have been issued on or after 17 March 2016. In both cases, there are detailed conditions that must be satisfied to qualify for the relief.

England & Wales Guide

The England & Wales guide answers the principal questions for Private Clients relating to the law in this jurisdiction.