What is Capital Gains Tax?
Capital Gains Tax is the tax you pay on any profit you make when you dispose of an asset that has increased in value. The amount of gain (or profit) you make is taxed, rather than the amount of money you receive from the sale.
Disposing of an asset refers to selling it, giving it away, swapping it for something else, or getting compensation for it (for example from an insurance claim).
Capital Gain Tax RatesYou pay a different rate of tax on gains from residential property than you do on other assets. Fortunately, you will not be expected to pay Capital Gains Tax on ISAs or PEPs, security and premium bonds issued by the United Kingdom government, or winnings such as bets, pools and lottery wins. You do not usually pay tax when you sell your home.
There is also a tax-free allowance. This means that you only must pay tax when your capital gain is above the set annual amount. For citizens, this currently sits at £11,700, and £5,850 for trusts.
- Work out how much taxable income you have – this is your income minus your Personal Allowance and any other Income Tax reliefs you’re entitled to.
- Work out your total taxable gains.
- Deduct your tax-free allowance from your total taxable gains.
- Add this amount to your taxable income.
- If this amount is within the basic Income Tax band you’ll pay 10% on your gains (or 18% on residential property).
- If this amount is above the basic Income Tax band You’ll pay 20% (or 28% on residential property).
Our Capital Gain Tax Service Includes
- Capital Gains Tax Calculations
- Real Time CGT Reporting
- Capital Gains Tax Filing
What is Capital Gains Tax Paid on?
Capital Gains Tax is typically paid when you dispose of any of the following:
- Personal possessions worth over £6,000 (excluding your car)
- Any property that isn’t your main home
- Your main home if you’ve let it out, used it for business, or it’s very large
- Shares that aren’t in an ISA or a PEP
- Business Assets
Capital Gains on Property
You do not pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply:
- You develop your home, for example by converting part of it into flats
- You sell part of your garden and your total plot is over half a hectare (1.2 acres)
- You use part of your home exclusively for business
- You let all or part of your home out
- You live away from the property
- You bought or improved the home partly or wholly for the purpose of making a profit
You do not need to do anything. You’ll automatically get a tax relief called Private Residence Relief.
CCGT is not usually payable on the gains you make on your only or main home, as these typically qualify for private residence relief (PRR). You should be aware, however, that, even if your property is your main or only home, part or all of the gain will be taxable if:
- You develop your home, for example by converting part of it into flats You sell part of your garden and your total plot is over half a hectare (1.2 acres).
- You use part of your home exclusively for business.
- You let all or part of your home out.
- You live away from the property.
- You bought or improved the home partly or wholly for the purpose of making a profit.
Capital Gains Tax Relief
Whilst Capital Gains Tax is becoming an increasingly common issue for both individuals and companies in London, there are many reliefs available and, with some careful per transaction planning, we can help to ensure that your exposure to Capital Gains Tax is minimised.
Using various techniques and our extensive experience, we can advise you on this complex issue and ensure that you obtain the optimum amount of relief you are entitled to.
CGT reliefs include:
- Deferral of the gain, by utilising rollover or holdover relief
- Gift relief, when certain assets are being gifted away
- Entrepreneurs’ Relief for business assets
For a free initial meeting to discuss all your Capital Gains Tax related needs, please drop us a line using our Online Quick Quote Form