Utilising the capital gains tax annual exemption

Produced by Tolley
Utilising the capital gains tax annual exemption

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Utilising the capital gains tax annual exemption
  • Why is this important?
  • Tax-free amount
  • No carry-forward
  • Restricted annual exemption
  • Nil annual exemption
  • Choosing how to use the annual exemption
  • Gains taxed at different rates
  • Current year losses deducted in priority to the annual exemption
  • When the annual exemption is preserved
  • More...

Why is this important?

Tax-free amount

Each individual, whether or not they are resident in the UK, is entitled to an annual exempt amount when calculating the taxable amount of their chargeable gains for the tax year (although see the exceptions below). The annual exempt amount is also known as the annual exemption. The annual exemption is similar to the personal allowance for income tax in that the amount of gains covered by the annual exemption is not chargeable to capital gains tax (CGT).

The annual exemption is £12,000 for the 2019/20 tax year and £12,300 for the 2020/21 tax year.

No carry-forward

Any part of the annual exemption that is not set against gains in the tax year is lost. It cannot be carried forward or transferred to another person.

Restricted annual exemption

Personal representatives of a deceased person’s estate are entitled to the full annual exemption for an individual for the year the deceased died and the following two tax years. If gains arise beyond that period, no annual exemption is available.

Trustees are generally entitled to an annual exemption equal to half that available to an individual. Where there is a group of settlements made by the same settlor, the annual exemption for each settlement is proportionally reduced (the minimum annual exempt amount is £1,200 for 2019/20 and £1,230 for 2020/21).

Nil annual exemption

If a taxpayer who is not domiciled or deemed domiciled in the UK makes a claim to use the remittance basis for the tax year, they forfeit their annual exemption for that tax year. This means that no annual exemption can be deducted from UK gains or overseas gains taxed in the UK. For more on the remittance basis of taxation, see the Remittance basis ― overview guidance note.

Choosing how to use the annual exemption

Gains taxed at different rates

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