Inland Revenue Capital Gains Tax may be charged on the gains you make whenever you dispose of a capital asset that has increased in value since you acquired it. 'Disposal' refers to various different methods of transferring the asset on to someone else, including selling it, exchanging it, or giving it away as a gift. Inland Revenue Capital Gains Tax is calculated by adding the total taxable gains that you have accrued over the financial year and adding them to your taxable income, then levying a tax rate on the capital gains as if they were the 'top slice' of the sum of taxable income.
There are numerous exemptions and conditions affecting Inland Revenue Capital Gains Tax that can make it quite complex. Listed here are a few of the exemptions that can help to reduce your taxable gains:
- The first £9,200 of gains falls under the annual exempt amount (AEA).
- Your primary private residence may be exempt from Capital Gains Tax as long as it falls under certain conditions.
- Your car.
- Any gains on assets of value under £6,000.
- ISAs and PEPs.
- Winnings from bets and lotteries.
- Capital losses on assets that are disposed of can be used to reduce your total capital gains for the year.
Additionally, taper relief means that as time passes after you acquire an asset, the tax you are liable to pay for any gains on it upon disposal is reduced. For business assets, Inland Revenue Capital Gains Tax is reduced by 75% after just two years, while for non-business assets the reduction reaches 40% after ten years.
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