Income and chargeable gains tax—round down at each stage of the
calculation
Band of taxable income and non-savings income Tax rate
£0-£37,500 Basic 20%
£37,501-£150,000 Higher 40%
Over £150,000 Additional 45%
Dividend tax bands Tax rate
£0-2,000 Nil rate 0%
£2,000-£37,500 Basic 7.5%
£37,501-£150,000 Higher 32.5%
Over £150,000 Additional 38.1%
Chargeable gains tax bands Tax rate
£0-37,500 Basic 10%
£37,500 and over Higher & additional 20%
Income tax
1. Find the total income by adding up income (e.g. bank interest, employer perks). Ignore capital
receipts.
2. Find the net income by subtracting outgoings e.g. interest paid on loans & pension contributions.
3. Find the taxable income by deducting the personal allowance (£12,500).
If net income exceeds £125,000, no PA.
If net income exceeds £100,000, PA reduces to £12,500 - ((net income - £100,000)/2).
4. Find the non-savings income by deducting savings income & dividends income from taxable
income.
5. Find the PSA. If there is no taxable income, there is no PSA. If the taxable income exceeds £150,000,
there is no PSA. If the taxable income is between £37,501 and £150,000, the PSA is £500. If the
taxable income is ≤£37,500, the PSA is £1000.
6. Apply the relevant tax rates and remember the measuring jug (& include PSA).
i. Non-savings income taxed first = taxable income – savings income – dividends income.
ii. Tax savings income e.g. bank interest. PSA taxed at 0%. Remainder taxed to above brackets.
iii. Finally, tax dividends income remembering to exclude £2,000 from tax.
7. Add tax together to reach the total tax liability.
Chargeable gains
1. Start with sale proceeds or market value if CP (s.286 TCGA) or gift/transaction at undervalue. Note:
CPs = direct relatives & their spouses (e.g. GPs, siblings) not lateral relatives (aunts, nieces);
No CGT payable when disposal:
i. is made between spouses, as no gain or loss occurs (s.58);
ii. is made to charity, as no gain or loss occurs (s.257);
iii. is made of an excluded asset = motor cars for private use (s.263); wasting chattels
(s.44); cash; and principal private residences (s.222).
2. Find net sale proceeds by deducting disposal expenditure (e.g. sales commission).
3. Find total chargeable gain by:
a. deducting initial expenditure (base & incidental costs); and
b. deducting subsequent expenditure (costs incurred enhancing value and defending title).
4. Deduct the carried-forward or carried-across losses.
5. Find taxable chargeable gain by deducting annual exemption i.e. £12,300.
6. If applicable, deduct any reliefs available i.e. either hold-over or roll-over relief (see below).
7. Apply the relevant chargeable gains tax rate (but check first BADR & IR)
When taxable income + total chargeable gains = ≤37,500 apply 10% CGT
When taxable income = >37,500 apply 20% CGT.
, When taxable income = <37,500 but with gains the total >37,500 then:
i. any gains within the unused part of basic rate tax band are charged 10%;
ii. any gains which exceed this threshold are charged at 20%.
Roll-over relief is available when business assets are sold and replaced. It postpones CGT liability by
rolling over the gain into the replacement asset (s.152 TCGA). Applies to land, buildings, fixed plant
and machinery, and goodwill. The annual exemption cannot be used to reduce the donor’s gain rolled
over. The whole chargeable gain must be rolled over.
Hold-over relief is available when an individual gives away a business asset (e.g. goodwill, business
assets, shares in a trading company not quoted on a stock market). As a transfer at undervalue or a
gift, market rule applies. Donor has no CGT liability & instead it’s postponed until donee disposes of
asset—or further postponed if donee also gives it away (s.165 TCGA). The annual exemption cannot
be used to reduce donor’s gain held over & the whole chargeable gain is held over. If asset = sold at
undervalue, hold-over relief applies only to the gift element i.e. difference between the price paid
and market value.
Business Asset Disposal Relief reduces higher rate of CGT from 20% to 10% on qualifying disposals
made on or after 6/09/08. It applies where someone disposes of shares in C where:
1. C is & has been for two years prior to date of disposal a trading (not investment) C; and
2. the shares have been held for at least two years before the date of disposal; and
3. the person disposing of the shares has been an officer or employee of C; who
4. holds at least 5% of ordinary voting shares and is entitled to at least 5% of distributable
profits and 5% of net assets on a winding up, for at least two years before disposal; and
5. the lifetime BADR limit of £1 million has not already been used up.
Investors’ relief (Finance Act 2016) reduces higher rate of CGT from 20% to 10% for gains arising on
disposals of qualifying shares. Shares are qualifying if:
1. they’re fully paid ordinary shares issued to the investor for cash con. on or after 17/03/16;
2. C is (and has been since shares were issued) a trading C or the holding C of a trading
group;
3. at the time of issue, none of C’s shares were listed on a recognised stock exchange;
4. shares were held by the investor for at least 3 years from 6/04/16 and continuously since
i.e. relief is available on 6/04/19 at the earliest;
5. individual or CP is not (nor has been any time since share issue) an officer/employee of
C;
6. and the lifetime IR limit of £10 million has not already been used up.
VAT
Output tax = VAT chargeable by a business when making a supply of goods or services.
Input tax = VAT paid by a person when buying goods or services.
calculation
Band of taxable income and non-savings income Tax rate
£0-£37,500 Basic 20%
£37,501-£150,000 Higher 40%
Over £150,000 Additional 45%
Dividend tax bands Tax rate
£0-2,000 Nil rate 0%
£2,000-£37,500 Basic 7.5%
£37,501-£150,000 Higher 32.5%
Over £150,000 Additional 38.1%
Chargeable gains tax bands Tax rate
£0-37,500 Basic 10%
£37,500 and over Higher & additional 20%
Income tax
1. Find the total income by adding up income (e.g. bank interest, employer perks). Ignore capital
receipts.
2. Find the net income by subtracting outgoings e.g. interest paid on loans & pension contributions.
3. Find the taxable income by deducting the personal allowance (£12,500).
If net income exceeds £125,000, no PA.
If net income exceeds £100,000, PA reduces to £12,500 - ((net income - £100,000)/2).
4. Find the non-savings income by deducting savings income & dividends income from taxable
income.
5. Find the PSA. If there is no taxable income, there is no PSA. If the taxable income exceeds £150,000,
there is no PSA. If the taxable income is between £37,501 and £150,000, the PSA is £500. If the
taxable income is ≤£37,500, the PSA is £1000.
6. Apply the relevant tax rates and remember the measuring jug (& include PSA).
i. Non-savings income taxed first = taxable income – savings income – dividends income.
ii. Tax savings income e.g. bank interest. PSA taxed at 0%. Remainder taxed to above brackets.
iii. Finally, tax dividends income remembering to exclude £2,000 from tax.
7. Add tax together to reach the total tax liability.
Chargeable gains
1. Start with sale proceeds or market value if CP (s.286 TCGA) or gift/transaction at undervalue. Note:
CPs = direct relatives & their spouses (e.g. GPs, siblings) not lateral relatives (aunts, nieces);
No CGT payable when disposal:
i. is made between spouses, as no gain or loss occurs (s.58);
ii. is made to charity, as no gain or loss occurs (s.257);
iii. is made of an excluded asset = motor cars for private use (s.263); wasting chattels
(s.44); cash; and principal private residences (s.222).
2. Find net sale proceeds by deducting disposal expenditure (e.g. sales commission).
3. Find total chargeable gain by:
a. deducting initial expenditure (base & incidental costs); and
b. deducting subsequent expenditure (costs incurred enhancing value and defending title).
4. Deduct the carried-forward or carried-across losses.
5. Find taxable chargeable gain by deducting annual exemption i.e. £12,300.
6. If applicable, deduct any reliefs available i.e. either hold-over or roll-over relief (see below).
7. Apply the relevant chargeable gains tax rate (but check first BADR & IR)
When taxable income + total chargeable gains = ≤37,500 apply 10% CGT
When taxable income = >37,500 apply 20% CGT.
, When taxable income = <37,500 but with gains the total >37,500 then:
i. any gains within the unused part of basic rate tax band are charged 10%;
ii. any gains which exceed this threshold are charged at 20%.
Roll-over relief is available when business assets are sold and replaced. It postpones CGT liability by
rolling over the gain into the replacement asset (s.152 TCGA). Applies to land, buildings, fixed plant
and machinery, and goodwill. The annual exemption cannot be used to reduce the donor’s gain rolled
over. The whole chargeable gain must be rolled over.
Hold-over relief is available when an individual gives away a business asset (e.g. goodwill, business
assets, shares in a trading company not quoted on a stock market). As a transfer at undervalue or a
gift, market rule applies. Donor has no CGT liability & instead it’s postponed until donee disposes of
asset—or further postponed if donee also gives it away (s.165 TCGA). The annual exemption cannot
be used to reduce donor’s gain held over & the whole chargeable gain is held over. If asset = sold at
undervalue, hold-over relief applies only to the gift element i.e. difference between the price paid
and market value.
Business Asset Disposal Relief reduces higher rate of CGT from 20% to 10% on qualifying disposals
made on or after 6/09/08. It applies where someone disposes of shares in C where:
1. C is & has been for two years prior to date of disposal a trading (not investment) C; and
2. the shares have been held for at least two years before the date of disposal; and
3. the person disposing of the shares has been an officer or employee of C; who
4. holds at least 5% of ordinary voting shares and is entitled to at least 5% of distributable
profits and 5% of net assets on a winding up, for at least two years before disposal; and
5. the lifetime BADR limit of £1 million has not already been used up.
Investors’ relief (Finance Act 2016) reduces higher rate of CGT from 20% to 10% for gains arising on
disposals of qualifying shares. Shares are qualifying if:
1. they’re fully paid ordinary shares issued to the investor for cash con. on or after 17/03/16;
2. C is (and has been since shares were issued) a trading C or the holding C of a trading
group;
3. at the time of issue, none of C’s shares were listed on a recognised stock exchange;
4. shares were held by the investor for at least 3 years from 6/04/16 and continuously since
i.e. relief is available on 6/04/19 at the earliest;
5. individual or CP is not (nor has been any time since share issue) an officer/employee of
C;
6. and the lifetime IR limit of £10 million has not already been used up.
VAT
Output tax = VAT chargeable by a business when making a supply of goods or services.
Input tax = VAT paid by a person when buying goods or services.
