CGT is a tax that is charged if you exchange, sell, give away or dispose of a particular asset and make a ‘gain’ or profit. It is not actually the amount of money that you receive for the given asset but the gain that you make which is taxed. To calculate the gain, you typically compare the sales proceeds (or the value of the asset at the time that it has been disposed of) with the original cost of your asset (or the value whenever it was acquired).
When does CGT apply to you?
CGT applies to you when you give away, sell, dispose of, or exchange an asset, although gains on certain assets are specifically exempt from any CGT. If you are a resident of the UK, it’s possible that you might be liable to different variations of CGT on the disposal of assets located anywhere globally; not just your assets located in the UK. You may also have to pay CGT if you give a certain asset as a gift to someone else. These rules change depending on who receives the gift and there are also special reliefs given for gifts that are business assets.
Are any assets exempt from CGT?
- Privately owned motor cars, such as vintage cars
- Gifts given to charities registered in the UK
- Certain government securities
- Betting and prize winnings
- Assets that are held in ISAs
- Foreign currency which is held for your own personal use
What is the annual exempt amount?
Every tax year, the majority of individuals who happen to be a UK resident are allowed to make a given amount of capital gains before they are forced to pay CGT. This is generally because they are entitled to annual tax-free allowance, known as the annual exempt amount (AEA). This is also sometimes referred to as an annual exemption.
For the 2022/23 tax year you can make gains of as much as £12,300 completely tax free. At the Budget of 2021, the UK government announced that the annual exempt amount will be frozen at this level for tax years up to and including the 2025/26 year. Any unused annual exempt amount cannot be carried back or forward. Each civil partner or spouse gets their own annual exempt amount.
What rate is CGT charged at?
The rate of capital gains tax that you pay will partly depend on the type of chargeable asset that you have disposed of and partly on the given tax band into which the gain will fall when it is subsequently added to your taxable income.
If you are selling something for profit, then there is a chance that the profits from the sale may be subject to capital gains tax. It’s a complex area of taxation law and it’s easy to get it wrong. Before you take another step towards selling, just run it past our capital gains tax experts. They’ll be pleased to advise you and prepare the necessary calculations and paperwork if required. Makinson & Co are the local capital gains tax experts in Lydney. Contact our team and discuss your plans with us. We’ll be glad to help.
Makinson & Co. are your local accountant team situated in the Forest of Dean. We have over 40 years’ experience in all tax matters, and work with small to medium sized companies in and around Gloucestershire. If you would like to know more information about what we do and how we can help, take a look at our website www.makinsonandco.co.uk or give us a call on 01594 842188 – we’d be happy to help!