If you want to avoid Capital Gains Tax (CGT) then it is wise to make yourself aware of the complex exemptions and laws surrounding CGT. Capital Gains Tax can be mitigated or even completely avoided through various tax relief schemes and particular types of asset that are exempt.
The basic process by which Capital Gains Tax is calculated is as follows:
- The capital gains on any assets that you have disposed of are added to your taxable income.
- The gains are then taxed as if the ‘top slice’ of the sum of taxable income.
Exemptions and reliefs that can help to avoid Capital Gains Tax include:
- An annual exemption amount of £9,200 in capital gains that is not subject to tax.
- Taper relief reduces the rate of tax payable on capital gains based on the time since the asset was acquired.
- Exemptions for chattels with a predictable life of under 50 years, and for other chattels of £6,000 or less in value.
- Your car.
- ISAs and PEPs.
- Winnings from lotteries and betting.
- Your main residence may be exempt.
For more information and advice on how to avoid Capital Gains Tax, check out the links below or visit our Fair Investment Tax Bookshop for useful guides and calculators that can help make navigating the complexities of capital gains a simple matter.