Taxation of Chargeable Gains Act 1992

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The Taxation of Chargeable Gains Act 1992 is an Act of Parliament which governs to levying of capital gains tax in the United Kingdom. Capital gains tax is a tax charged on the increase in the capital value of an asset between purchase and sale of that asset.

The tax operates under two different regimes for a natural person and a body corporate. For a natural person the tax is levied at a rate determined by the highest rate of income tax which that person pays. If the person is a higher-rate tax payer than the higher rate of income tax (currently 40%) is charged on the gain. The rates of capital gains tax are the same as those for earned income. Each year a natural person has an amount of gain which is exempt from tax. Bodies corporate by contrast have capital gains tax charged as additional corporation tax. The chargeable gain is treated as additional profits for the accounting period in question. Bodies corporate have no allowance for gains free form tax.

Various reliefs from capital gains tax exist. These include indexation relief, where the amount of gain subject to tax is reduced by factoring in general price inflation and taper relief where set percentages of the gain are exempt from tax if the asset has been held for a certain length of time.