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Capital Taxes

Mortgage application documents

Capital gains tax (CGT) rates

No changes to the current rates of CGT have been announced. This means that the rate remains at 10%, to
the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18%
and 28% apply for certain gains, mainly chargeable gains on residential properties, with the exception
of any element that qualifies for Private Residence Relief.

There is still potential to qualify for a 10% rate, regardless of any available income tax basic rate
band, up to a lifetime limit for each individual. This is where specific types of disposals qualify

  • Business Asset Disposal Relief (BADR). This is targeted at directors and employees who own at least
    5% of the ordinary share capital in the company, provided other minimum criteria are also met. It can
    also apply to owners of unincorporated businesses.
  • Investors’ Relief. The main beneficiaries of this relief are investors in unquoted trading
    companies who have newly-subscribed shares but are not employees.

Current lifetime limits are £1 million for BADR and £10 million for Investors’ Relief.

CGT annual exemption

The government has announced that the capital gains tax annual exempt amount will be reduced from
£12,300 to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024.

Chargeable gains: separated spouses and civil partnerships

The current legislation applying to the transfer of assets between an individual and their spouse or
civil partner provides that such transfers made in any tax year in which they are living together are
on a no gain/no loss basis. Where spouses or civil partners separate, no gain/no loss treatment is
currently only available in relation to disposals made in the remainder of the tax year in which they
cease to live together. After that, transfers are treated as normal disposals for CGT purposes.

A number of changes are proposed to the rules that apply to transfers of assets between spouses and
civil partners who are in the process of separating and no longer living together. These include the

  • Separating spouses or civil partners will be given up to three years after the year they cease to
    live together in which to make no gain/no loss transfers.
  • No gain/no loss treatment will also apply to assets that separating spouses or civil partners
    transfer between themselves as part of a formal divorce agreement.
  • A spouse or civil partner who retains an interest in the former matrimonial home will be given an
    option to claim Private Residence Relief when it is sold.
  • Individuals who have transferred their interest in the former matrimonial home to their ex-spouse
    or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually
    sold will be able to apply the same tax treatment to those proceeds when received that applied when
    they transferred their original interest in the home to their ex-spouse or civil partner.

The changes are expected to apply in relation to a disposal made on or after 6 April 2023.

Other CGT changes

A number of other technical changes to CGT legislation have been announced from April 2023:

  • Changes to ensure that Roll-Over Relief and Private Residence Relief are available for LLPs and
    Scottish partnerships when an exchange of interest in land or private residences held by the LLP or
    partnership occurs.
  • Changes to prevent UK resident non-domiciled individuals who exchange securities in a UK close
    company for securities in a similar non-UK company from accessing the remittance basis of taxation on
    gains realised on the disposal of those non-UK securities.

Inheritance tax (IHT) nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2028.
An additional nil rate band, called the ‘residence nil rate band’ (RNRB) is also frozen at the current
£175,000 level until 5 April 2028. A taper reduces the amount of the RNRB by £1 for every £2 that the
‘net’ value of the death estate is more than £2 million. Net value is after deducting permitted
liabilities but before exemptions and reliefs. This taper will also be maintained at the current level.

Estates in administration and trusts

Changes are introduced which will affect the trustees of trusts and personal representatives who deal
with deceased persons’ estates in administration, and beneficiaries of estates.

For 2023/24, technical amendments are made to ensure that, for beneficiaries of estates, their tax
credits and savings allowance continue to operate correctly.

For 2024/25, changes will:

  • Provide that trusts and estates with income up to £500 do not pay tax on that income as it arises.
  • Remove the default basic rate and dividend ordinary rate of tax that applies to the first £1,000
    slice of discretionary trust income.
  • Provide that beneficiaries of UK estates do not pay tax on income distributed to them that was
    within the £500 limit for the personal representatives.
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