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:

 

  • When you sell or exchange an asset
  • When you transfer or give away an asset (unless given to charity)
  • When you have inherited an asset

 

ssets affected (whether in the UK or abroad) include:

  • Company shares
  • Units in a unit trust
  • Buildings and land
  • High value items such as antiques and jewelry
  • Assets used in a business

 

There are, however, numerous exemptions from Capital Gains Tax that are available, including:

  • Your private car
  • Savings certificates, premium bonds and British savings bonds
  • Cash in sterling and foreign currency for your or your family's use
  • ISAs, PEPs and Gilts
  • Personal items worth less than £6,000 on disposal
  • Winnings from betting and lotteries
  • Compensation from personal injury claims
  • Your primary residence (although conditions apply)

 

As at 2012/13 first £10,600 of potentially taxable gains falls in the AEA – the annual exempt amount – and is exempt from capital gains taxation. 

 

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.

Disclaimer: Every effort is made to keep the site accurate, however please bear in mind that tax rates are subject to change. If you require tax advice you should speak to a professional tax adviser.