Capital Gains Tax
Capital Gains Tax (CGT) is applied to the profit you make when you sell, give away or otherwise dispose of something that you own, such as shares or property. You may also be liable for CGT when you give away, part exchange or exchange goods.
CGT is not levied on any income which forms part of your calculation for Income tax. Married couples or civil partners, who transfer assets to one another, can do so without CGT being applied.
How much is CGT?
A flat rate of Capital Gains Tax (CGT) of 18% was introduced on 6th April 2008 and applies to all chargeable gains after the following have been accounted for:
- Annual Tax free allowance
- Losses that have been taken into account
- Any relevant reliefs considered
How can I reduce my CGT?
There is tax-free allowance and some additional reliefs that may reduce your Capital Gains Tax bill. Sometimes you may have very little or no tax to pay when using various reliefs like Entrepreneurs Relief, Business assets roll-over relief, Business transfer relief or incorporation relief.
The Entrepreneurs Relief (ER) may be available for some business disposals. For a high rate tax payer the ER enables the contractor to get an effective relief of 10% on the first £1m gains qualified.
The ER will apply to gains that come from the disposal of:
- the whole, or part, of a trading business that is carried on by the individual, either alone or in partnership
- shares in a trading company, or holding company of a trading group, provided that the individual owns broadly a 5% shareholding and has been an officer or employee of the company
- Assets used by a business or a company which has ceased
- Assets used in a partnership or by a company but owned by an individual, if the assets disposed of are “associated” with the withdrawal of the individual from participation in the partnership or the company.
Am I Exempt from CGT?
Every tax year each individual is allowed to make gains up to the annual exemption without paying any CGT. The annual exemption for 2011/12 is £10,600. Consideration should be given to ensuring both spouses/civil partners utilise this facility.
