The Capital Gains Tax (CGT) and Inheritance tax (IHT) thresholds have been frozen until April 2026. In this article, we summarise what you need to know about both these taxes.
Capital Gains Tax (CGT)
The current rates of Capital Gains Tax (CGT) are 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 except for any element that qualifies for private residence relief.
There are two specific types of disposals which potentially qualify for a 10% rate:
- Business Asset Disposal Relief (BADR) which was formerly known as Entrepreneurs’ Relief. This is targeted at working directors and employees of companies who own at least 5% of the ordinary share capital in the company and the owners of unincorporated businesses. BADR has a lifetime limit of £1 million for each individual.
- Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly- subscribed shares. This has a lifetime limit of £10 million for each individual.
The CGT annual exemption is £12,300 for 2022/23 and will remain frozen until April 2026.
CGT reporting
New reporting and payment on account obligations for chargeable gains on residential property were introduced in April 2020. From 27 October 2021, the deadline to report and pay CGT after selling UK residential property was increased from 30 days after the completion date to 60 days.
Inheritance tax (IHT) nil rate bands
The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2026.
The residence nil rate band (RNRB) was introduced in 2017, meaning that the family home can be passed more easily to direct descendants on death.
The rate of the RNRB is £175,000 for 2022/23.
There are several conditions that must be met in order to obtain the RNRB.
For many married couples and registered civil partnerships, the relief available following the second death can effectively be doubled as each individual has a main nil rate band and a residence nil rate band which passes on the surviving spouse's death.
A reduced rate of IHT applies where broadly 10% or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil-rate band) is left to charity. In those cases, the 40% rate will be reduced to 36%.
If you would like any advice about Capital Gains Tax or Inheritance Tax then please do contact us by calling 01623 490 120 or email