C1.106A Annual exempt amount
For a gain or loss to be within the scope of tax on chargeable gains, there must be a chargeable disposal of a chargeable asset by a chargeable person. See C1.104, C1.103 and C1.102 respectively.
Individuals, trustees and personal representatives are subject to capital gains tax on chargeable gains. Companies are subject to corporation tax on chargeable gains. See C1.102.
This article discusses relief for annual exempt amount. For the computation of chargeable gains and losses, see C1.105. For the rates of tax that apply to chargeable gains, see C1.107.
Annual exempt amount
The annual exempt amount applies for capital gains tax only. Companies are not entitled to an annual exempt amount.
Essentially, the annual exempt amount (also known as the AEA or the annual exemption) is the amount of tax-free chargeable gains that a person can realise in the tax year. It is deducted from the net chargeable gains for the tax year (ie the current year gains after setting off current year allowable losses and brought forward losses) to give the total taxable gains1. The deduction of the annual exempt amount cannot produce a negative figure and any unused exemption cannot be carried forward2
The set-off of allowable losses is discussed in C1.106, however there are three important points to note in relation to the annual exempt amount3:
• current year allowable losses are set against current year chargeable gains in priority to the annual exempt amount
• brought forward losses are set against any current year gains once