Simply put Capital Gains Tax is a tax by HMRC on the profit you make when you 'dispose' of something of physical presence and value (an asset) eg a rental property, stocks and shares or a piece of art.
Eg you sell a piece of buy-to-let property for £300,000. Which you bought it for £200,000. Equals a capital gain of £100,000.
A lot of people think it is only applicable in the case of a sale but according to HMRC it is applicable in other actions such as giving it away as a gift, transferring it to someone else, swapping for something else and getting compensation eg Insurance payment if it is damaged or stolen.
Certain types of assets are eligible for capital gains tax while others are not. Your primary residence ie your home is not eligible for capital gains while a second property is.
Some of the things on which you may need to pay Capital Gains Tax on are as follows:
But please note that depending on actual type of asset, you may be able to reduce any capital gains tax due by claiming a relief's that are available. There are many different types of reliefs and it usually best to visit a reputable accountant like Tax Affinity Accountants to make sure you take advantage of all the reliefs available to you.
To help you HMRC has given everyone a tax free allowance after which capital gains tax will apply. Currently this is £11,100 for a Person and £5550 for a Trust for the 2015-16 Tax Year.
Eg If your personal gain is £12,000 then deducting your personal allowance of £11,100 from the gain leaves you £900 on which capital gains tax can be charged.
If you have any overseas assets then you may still have to pay Capital Gains Tax. There are however special rules if you are a British citizen or UK resident and are not domiciled in the UK whereby you can claim the ‘remittance basis’.
If you living abroad then unfortunately you still have to pay tax on any gain you make on a residential property that is in the UK. This is even if you are declared as non-resident to HMRC. But the good news is that you do not have to pay Capital Gains Tax on any other UK assets, eg stocks and shares in UK companies, piece of art and business assets etc unless you return within 5 tax years of the gain.
As capital gains tax rates can be either 18% or 28% of the gain depending on your personal income, it is a really good advice to speak to a qualified accountant as a good accountant should save you much more money than he/she would ever charge. At Tax Affinity Accountants we are one of the most recommended experts in Capital Gains Tax, due to our detailed knowledge of tax reliefs available and of the HMRC tax system.
By Anni Khan at Tax Affinity Accountants.
Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they provide a bespoke service to client’s right across the UK and are considered in the industry to be experts in capital gains tax advice.
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