Can capital gains be offset by personal allowances?

Simran

Hi...I wonder if someone could clarify something re CGT...if someone has unused personal allowances, can this be set against taxable capital gains after the CGT exemption has been deducted/used up? or can capital gains only be reduced by the CGT exemption and any gain left over must be taxed (and cannot further be reduced by unused personal allowances?) for example I have gains of £9500, after the CGT exemption this becomes £1,000..I also have unused personal allowances..can I use these against the £1,000 or do I pay CGT at my marginal rate?

Thanks!

Ian_W

Hi Simran,
I'm no expert, but my guess would be yes on the basis that your marginal rate until you exceed your personal allowance is 0%, then 10%, etc. My understanding is your taxable gain is effectively added to your income for the year to establish the rate payable and if it crosses from one band to another the higher rate applies to the excess.

However, that's a logical approach - this is tax so let's hope one of the knowledgeable accountants who lurk hereabouts can confirm, or not, my view.

pchelpman

Sorry, Ian, but although Capital Gains are taxed from the lowest rates up, Simran cannot utilise any unused personal tax allowances against capital gains to reduce the amount of tax due.

Simran ... you need to add your capital gains to your taxable income. The rate of CGT you will pay depends on the level of your other income with your gains being taxed at your top rate of tax.

The rates of tax on capital gains for 2005/06 are:

* 10% up to £2,090 where this has not already been used against your income first
* 20% from £2,091 to £32,400 where this has not already been used against your income first
* 40% above £32,400