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UK Capital Gains Tax Rates

In Australia, capital gains are simply added to your other assessable income and you pay tax at your marginal tax rate on the capital gain rather than a specific tax rate.

In contrast, with the UK capital gains tax system you have to first work out which Income Tax Band your taxable income including total taxable gains is within and that will then determine which rate of tax you will pay on capital gains.

For example, if your income was in the Personal Allowance income tax band (i.e. income up to £11,500), you would not pay any tax on any capital gains derived during the tax year.

If your taxable income was in the Basic income tax band, you would pay 18% on any capital gains made on the sale of resident property.

If your taxable income is Higher Rate or Additional Rate bands, you will pay 28% on any capital gains made on the sale of resident property.

There is one further significant difference between the UK and Australian capital gains tax systems.Australia offers a capital gains tax discount of 50% applies to capital gains made by resident taxpayers and foreign residents up to 12 May 2012 where a property has been owned for more than 12 months.If you sell a UK property which is also subject to capital gains tax in Australia, then you need to take this into account when determining your Australian capital gains tax liability.

You should also be aware that you will pay tax in the UK based on your gain in Pounds Sterling (GBP) whereas the capital gains tax payable for Australian tax purposes will be based on the value of your UK property in Australian dollars (AUD).For Australian tax purposes, there is no distinction for capital gains tax purposes between the gain in the value of the property and the gain as a result of foreign currency fluctuations.

It would be possible for an investor to make a capital gain that was subject to tax in the UK but then make a capital loss for Australian tax purposes – or vice versa.It is therefore very important for investors to understand the tax implications of making a capital gain before selling a property.