Capital Gains Tax Calculator
Important notes
This Capital Gains Tax (CGT) calculator is designed to provide you with an estimate of your capital gains tax liability pre and post 5th April 2008 for comparison purposes. This means that the calculator uses 2007/08 tax bands & annual exemption for both pre & post 6th April 2008. The calculator does not allow you to offset losses.
This calculator does not consider Entrepreneurs Relief (see below).
The calculator takes account of indexation and taper relief for pre 5th April 2008 gains, where the reliefs are available. Calculations for pre April 5th 2008 gains may be performed on both single and joint holdings. Your liability under the old CGT regime is based on your income level and gains may fall in the 10%, 20% and/or 40% tax bands. It does not take into account any other tax reliefs that may be used to reduce, defer or offset CGT or the loss of age related allowances if you are aged 65 or over, or reflect any gains which have been rolled over or deferred against the current asset. The calculator works on the basis that you either qualified fully for business asset taper relief or not at all.
The calculator is to be used for indicative purposes only and is not designed to replace specialist tax advice. It should not be viewed as a recommendation to sell, hold or buy an investment, and investment decisions should not normally be made based on tax consequences alone. Hargreaves Lansdown accepts no liability for actions based solely on the calculator outputs.
Help notes
Purchase date of Investment
Under the old system, the amount of the taxable gain and therefore the capital gains tax you pay reduced the longer you held the investment for. Now the CGT rate is the same regardless of the length of time you hold an investment. This calculator can be used for dates on or after 31st March 1982. For disposals before 5th April 2008, you are able to choose whether to ‘rebase’ your cost for assets held prior to 31st March 1982 to their value at 31st March 1982. Post 6th April 2008, the value of the assets for disposal purposes will always be their 31st March 1982 value.
Cost of Investment
This is the price you paid for the investment. For example,
- Example 1 - If you invested £5,000 into a unit trust enter £5,000.
- Example 2: If you bought 250 shares at £20 per share, the cost is 250 x £20 = £5,000. Enter £5,000.
Value now
This should be the current value of the investment.
- Example 1 - If the £5,000 you invested in a unit trust is now worth £12,000, enter £12,000.
- Example 2: If the 250 shares you bought are now worth £56 a share, their value is 250 x £56 = £14,000, enter £14,000.
What is your annual income before tax?
In simple terms the amount of capital gains tax you paid was calculated by adding the taxable gain to your income ignoring personal allowances. Your liability under the old CGT regime is based on your income level and gains may fall in the 10%, 20% and/or 40% tax bands. For example if you pay tax at the basic rate, but the amount of the gain, when added to your income, takes you into the higher rate, you paid 20% on part of the gain and 40% on the balance.
If the gain is less than your annual capital gains tax exemption (£9,600 for the tax year 2008/9) then there will be no tax to pay.
Age related allowances: This calculator does not take into account the loss of age related allowances if you are aged 65 or over.
Indexation
Indexation applied to investments bought from 31st March 1982. The principle of indexation is to reflect inflation. Therefore, the longer you hold an investment for, the greater the indexation benefit and therefore the lower the potential for capital gains tax.
Essentially indexation increased the base cost of your investment, so that it lowers the amount of the gain.
Indexation was introduced from the 31st March 1982 and was replaced by taper relief on 6th April 1998.
Indexation cannot create or increase a loss – if indexation does create a loss, the loss is restricted to nil.
Taper Relief
Standard taper relief (known as non Business Asset Taper Relief) rewarded investors by reducing the amount of the taxable gain the longer you held the investment. The table below shows the rates for standard asset taper relief. Taper relief was introduced on 6th April 1998 and replaced indexation. If you bought an asset before 6th April 1998 you qualified for indexation relief up until then and taper relief thereafter.
| Pre 6th April 2008 effective rate of tax | New Rate of Tax | |||
|---|---|---|---|---|
| Number of whole years after 5th April 1998 | % gain chargeable | Basic rate | Higher rate | Everyone |
| 1 | 100% | 20% | 40% | 18% |
| 2 | 100% | 20% | 40% | 18% |
| 3 | 95% | 19% | 38% | 18% |
| 4 | 90% | 18% | 36% | 18% |
| 5 | 85% | 17% | 34% | 18% |
| 6 | 80% | 16% | 32% | 18% |
| 7 | 75% | 15% | 30% | 18% |
| 8 | 70% | 14% | 28% | 18% |
| 9 | 65% | 13% | 26% | 18% |
| 10 | 60% | 12% | 24% | 18% |
Business Asset Taper Relief
Certain investments qualified for Business Asset Taper Relief which was more generous, reducing the gain by as much as 75% after 2 years. This was aimed at business owners and those that invested in smaller businesses. The table below shows how Business Asset Taper Relief worked.
| Pre 6th April 2008 effective rate of tax | New Rate of Tax | |||
|---|---|---|---|---|
| Number of whole years | % gain chargeable | Basic rate | Higher rate | Everyone |
| 1 | 50% | 10% | 20% | 18% |
| 2 | 25% | 5% | 10% | 18% |
The following would normally have qualifed for Business Asset Taper Relief:
- Certain qualifying AiM shares
- Shares in unlisted companies
- Shares in a company where you are an employee
The following would have normally been subject to standard taper relief:
- Unit trusts and OEICS
- Listed shares where you are not the employee
Taper relief was abolished on the 5th April 2008.
Entrepreneurs Relief
Entrepreneurs Relief was announced by the Chancellor on 24th January 2008 and is effective from 6th April 2008. The relief will be available against the following;
- gains made on the disposal of all or part of a business, or
- gains made on disposals of assets following the cessation of a business
- by certain individuals who were involved in running the business
The relief will also apply to gains on disposals of shares (and securities) in a trading company (or the holding company of a trading group) provided that the individual making the disposal:
- has been an officer or employee of the company, or of a company in the same group of companies, and
- owns at least 5 per cent of the ordinary share capital of the company and that holding enables the individual to exercise at least 5 per cent of the voting rights in that company.
The terms 'trading company', 'holding company' and 'trading group' will have the same meaning as they currently do for the purposes of taper relief on business assets.
The first £1million of lifetime business capital gains will be subject to CGT at a rate of 10% with any remainder at 18%. The £1m limit will increase over time.
For example, an investor is a director of and has a material stake in two businesses. He sells both businesses in the 2008/09 tax year with personal gains of £800,000 and £500,000. The first £1m of the total £1.3m gain will be taxed at 10% with £300,000 taxed at 18%.
All other assets will be taxed at 18% from 6 April 2008.