Capital Gains Tax
Capital Gains Tax
Capital Gains Tax (CGT) is a tax levied by the government on the disposal of capital assets that have increased in value since you acquired them, including property and shares. For example, if you buy shares for £1,000 and sell them for £2,000, the £1,000 profit is taxable. You may be liable to pay Capital Gains Tax in the following situations:
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When you sell or exchange an asset
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When you transfer or give away an asset (unless given to charity)
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When you have inherited an asset
Assets affected (whether in the UK or abroad) include:
There are, however, numerous exemptions from Capital Gains Tax that are available, including:
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Your private car
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Savings certificates, premium bonds and British savings bonds
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Cash in sterling and foreign currency for your or your family's use
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ISAs, PEPs and Gilts
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Personal items worth less than £6,000 on disposal
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Winnings from betting and lotteries
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Compensation from personal injury claims
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Your primary residence (although conditions apply)
The first £9,600 of potentially taxable gains falls in the AEA – the annual exempt amount – and is exempt from capital gains taxation.
Above this level, assets are now charged at a single rate of 18 per cent – replacing the previous through which tax was charged at tiered rates ranging from 10 per cent to 40 per cent. Taper relief has also been abolished for the 2008/09 tax year.
So if when your assets are sold, £10,000 of the value is taxable, you will be required to pay £1,800 in Capital Gains Tax (providing you are not entitled to any other reliefs or deductions). Payment is included in the individual's self-assessment tax return.
Spousal transfers of assets are exempt from Capital Gains Tax, and each spouse in a marriage benefits from their own AEA, while joint assets have their taxable gains and losses divided between spouses.
For more information and advice on Capital Gains Tax, take a look at the links below or check out our
Fair Investment Tax Bookshop, full of useful guides and calculators.