Capital gains made by individuals are generally taxed at lower rates to income and taxpayers benefit from a separate annual exemption that covers the first £12,300 of gains made per year.
This exemption will be reduced to £6,000 for the tax year 2023-24 and then to £3,000 for 2024-25. Any annual exemption unused in a tax year cannot be carried over to the next year.
The lowering of the annual exemption will mean that many more individuals will have to report capital gains on a self assessment tax return.
When the gain arises from the disposal of a residential property in the UK it must be reported using the UK property service within 60 days of completion of the sale and the tax paid by the same deadline. This 60-day report is required in addition to the annual tax return.
The main rates of capital gains tax (CGT) remain at 10% for gains within the basic rate band and those subject to business asset disposal relief and 20% for other gains. However gains made from residential property are taxed at 18% within the basic rate band and 28% at higher rates.
The inheritance tax threshold (nil-rate band) has been fixed at £325,000 per person since 2009 and it will now be kept at that level until at least April 2028.
Where an individual leaves an interest in their main home to one or more children or other direct descendants they can also benefit from the residential nil-rate band worth a further £175,000 per person. That amount is also frozen until April 2028 although the value of residential properties has increased significantly since 2020-21 when it was introduced.
