18% or 28%

[TIMONLINE]

What determines whether you pay CGT at 18% or 28%? Is it dependant on whether your income exceeds the 20%/40% limit or is it dependant on whether you actually pay any tax at 40% after deductions?

[Peter D]

You at the capital gain to your gross normal income in the FY of disposal. You use the IT marginal tax rates to determine the CGT laibility. Some may be at 18% up to when you exceed the 20% band then the remainder at 28%. If you are already a higher rate tax payer then all the CG will be at 40%. Regards Peter

[Peter D]

Lots of typo's in that. 'You add', liability. Regards Peter

[TIMONLINE]

Ok - so if I earn £42K but have allowances of £7K bringing my taxable income to £35K I can pay £2500 CGT at 18% and the rest at 28%?

[maths]

For tax year 2011-12 18% applies to the capital gain element which falls between the individual's taxable income and £35,000. Above £35,000 the 28% applies.

If you earn £40,000 your taxable income is 40,000 less 7,475 ie 32,525.

Thus any capital gain will be taxed at 18% on the first 2,475 and 28% on the balance.