Everything you need to know about Capital Gains Tax

Everything you need to know about Capital Gains Tax

Capital Gains Tax (CGT) affects both individuals and businesses the chances are that you are likely to be affected by CGT at some point.

Nicola Roby gives an overview of what you need to know where CGT is concerned.

CGT is payable when you ‘dispose’ of an item and profit from the sale. The amount you are liable for depends on your income and the asset in question.

These could be personal items worth more than £6,000, a second home, shares you own in a limited company, a painting or even fine wines.

For example, you purchase a buy to let property for £180,000 then sell it for £220,000 four years later. This leaves you with a profit of £40,000 before deducting the annual exemption, which is potentially liable for CGT.

It is possible however to minimise your tax bill through careful CGT planning and there are several reliefs available to help to do this.

What are the rates of CGT and how is my gain calculated?

How much CGT you pay depends on the income tax band in which you fall.

If you’re a basic rate taxpayer (earning up to £46,350 in tax year 2018/19) you will pay 10% CGT.

If you are a higher rate tax payer (earning between £46,351 and £150,000 in tax year 2018/19) you will pay 20% CGT.

There is also a surcharge of 8% which applies to gains relating to the sale of residential properties that are not your main home.

Every taxpayer in the UK can take advantage of an annual CGT exemption (£11,700 for tax year 2018/19), which means you won’t pay any tax on gains worth less than this amount.

Your taxable gains are calculated after deducting your annual CGT exemption and any capital losses you have incurred.

If you don’t use all your annual exemption, you cannot carry the unused amount into another tax year or transfer it to another person.

Are there any items which are not subject to CGT?

Sale of your main home is not subject to CGT as it qualifies for private residence relief. Other assets which are exempt include moveable possessions worth no more than £6,000; cars of any value; government stock and savings certificates; foreign currency for personal use and debts and most corporate bonds.

What happens if I give assets away?

Any assets you give to charity are exempt from CGT.

There is also a general exemption from CGT for gifts between spouses or civil partners who are living together, but this doesn’t apply to gifts to other relatives.

So, for example if, if you give a property to your child, you will be taxed as if you are selling the property at market value.

What happens if I make a loss on disposal of as asset?

Investments can of course make losses when sold, for example shares in a company which have gone down in value.

Such capital losses can be set against the capital gains you have made in the same tax year or they can be carried forward.

When you own assets or shares which become worthless, you can also claim that capital loss as if you had disposed of the assets or shares.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

DID YOU FIND THIS USEFUL?

Share it with your network:  

Want more great content?
Sign up to our newsletter

    Follow us

    Tweets by @CHW-accounting

    CHW-Accounting
    @chw-accounting


    Twitter: chw_accounting

    WHAT'S THE NEWS?

    Grab a biscuit and a brew and read our latest news.

    19 February 2024

    Tax changes – What’s new in 2024?

    by

    We are now well and truly into 2024 and before you know it the end of the 2023/24 tax year on 5 April will be upon…


    Read more >

    12 February 2024

    National minimum wage – a quick guide to the...

    by

    The government sets a national minimum wage and a national living wage to guarantee that workers get a minimum standard of pay. It is a legal…


    Read more >

    7 February 2024

    HMRC to target undeclared dividend payments

    by

    HMRC have advised the Chartered Institute of Taxation (CIOT) that they have commenced a ‘One to Many’ letter campaign directed at taxpayers who HMRC suspect may…


    Read more >

    7 February 2024

    One week on from Self-Assessment deadline

    by

    We are now a week on from the self-assessment filing deadline of 31 January and figures show that more than double the number of taxpayers failed…


    Read more >

    5 January 2024

    Cut to National Insurance from 6th January 2024

    by

    From Saturday 6 January, the average earner will be almost £450 a year better off according to the government.  However, the reality is that due to…


    Read more >

    YOUR CHALLENGES

    No matter what your challenge is, we’ve probably dealt with it before.



    Need an Accountant?

    Get in touch >


    Need an Accountant?

    Get in touch >


    Tax issues?

    Find out more >


    Tax issues?

    Find out more >


    Trying to grow your business?

    We can help >


    Trying to grow your business?

    We can help >


    Managing cashflow?

    We can help >


    Managing cashflow?

    We can help >


    Starting a business?

    We can help >


    Starting a business?

    We can help >


    Looking for funding?

    Need help with funding? >


    Looking for funding?

    Need help with funding? >


    Buying or selling a business?

    We can help >


    Buying or selling a business?

    We can help >


    Adopt the cloud?

    We can help >


    Adopt the cloud?

    We can help >


    What else can we do for you?

    We can help >


    What else can we do for you?

    We can help >
    CONTACT US

    Get in touch, no hard sell, just a brew, a biscuit and a chat.