CGT is a tax on capital "gains". If when you sell or give away an asset it has increased in value, you may be taxable on the gain (profit). This doesn`t apply when you sell personal belongings worth £6,000 or less or, in most cases, your main home.
If you have sold, or you are thinking of selling an asset which you think may be liable to CGT, there are a number of questions that you must ask. We have a separate section for each of these - please use the links below :
sell, give away, exchange or otherwise dispose of (cease to own) an asset or part of an asset
receive money from an asset - for example compensation for a damaged asset
You don't have to pay CGT on:
your car
your main home, provided certain conditions are met
ISAs or PEPs
UK Government gilts (bonds)
personal belongings worth £6,000 or less when you sell them
betting, lottery or pools winnings
money which forms part of your income for income tax purposes
These are some points to bear in mind:
if you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
you can't give assets to your children or others or sell them assets cheaply without having to consider CGT
if you make a loss you may be able to make a claim to deduct that loss from other gains; but only if the asset normally attracts CGT - thus you cannot set a loss on selling your car against gains from disposing of other assets
if someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time. However, if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal.
Section: How is CGT worked out ?
From 6 April 2008 capital gains have been charged at a set rate of 18% of the net gain. The net gain is the proceeds received for the asset minus the purchase price and the cost of any capital improvements to the asset during ownership. In certain cases an entrepreneur's relief is due on the first £1 million of gains qualifying for relief and they will instead be taxed at 10%. This is a lifetime allowance and claims can be made on more than one occasion up to the lifetime limit. The relief may be due on gains made by individuals on the disposal of:
All or part of a trading business they carry on alone or in partnership;
Assets of the individuals or partnerships trading business after it ceases;
Shares in (and securites of)their personal trading company (or holding company of a trading group);
Assets owned by them and used by their personal trading company (or group) or partnership.
For assets sold prior to 6 April 2008 capital gains were charged depending upon your total income liability for the year.
Section: At what tax rate CGT payable ?
How much CGT you pay depends on your overall income. Your total taxable gains are added to your taxable income for the year and treated as the top part of that total. The gains are then charged to CGT at the following rates (2007-2008 tax year):
10 per cent where they fall below the starting rate limit for Income Tax (£2,230)
20 per cent where they fall between the starting rate and basic rate limits for Income Tax (£2,231 to £34,600)
40 per cent where they fall above the basic rate limit for Income Tax (£33,301 and above)
Section: How is CGT Paid ?
If you've received a Self Assessment tax return, follow the guidance to decide if you need to fill in the capital gains pages as part of that return. The return tells you how to obtain these pages if you need them. If you don't usually complete a tax return, but wish to report gains or losses, contact your local Tax Office and ask them to send you a return and the relevant pages. If you have CGT to pay you must tell your tax office in writing by 5 October following the tax year. There is a time limit for claiming losses.
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