Capital Gains Tax
What is Capital Gains Tax?
Capital Gains Tax, or CGT, is the tax you will pay when you ‘dispose of’, i.e. sell or gift an asset that has increased in value. It is a complex area of tax, and the rate of tax you could pay depends on your financial situation at the time of the sale and whether the asset is chargeable to Capital Gains Tax or exempt.
Any money you generate from a disposal of an asset could result in a taxable gain and may make you liable for Capital Gains Tax. There are different rules and reliefs around CGT, meaning calculating the tax you owe can be a complex.
What do you pay Capital Gains Tax on?
Capital Gains Tax is a tax on the sale, gifting, exchange, and disposal of assets for profit.
It is essential to note that CGT is levied on the profit or ‘gain’ arising from the disposal of the asset. Assets where Capital Gains Tax applies are as follows:
- Most personal possessions worth £6,000 or more, apart from your car.
- Property that’s not your main home.
- Your main home, if you’ve let it out, used it for business, or it’s very large.
- Shares that are not in an ISA or PEP
- Business assets
- Cryptoassets (check with us, as these rules are complex).
These are known as ‘chargeable assets’.
What are the Capital Gains Tax rates?
Capital Gains Tax rates vary from year to year and also depending on whether the gains are made from residential property, carried interest from an investment fund or other chargeable assets.
Basic rate taxpayers
Basic rate taxpayers will pay CGT depending on the size of their gain, their taxable income and whether their gain is from residential property or other assets.
Higher rate taxpayers
If you’re a higher or additional rate taxpayer, the amount you pay will depend on the date and type of your gain.
Find out more about Capital Gains Tax rates in our latest CGT factsheet.
Capital Gains Tax on residential property
You may have to pay Capital Gains Tax if you sell a property that’s not your home and make a profit. This will be applicable if you sell: :
- buy-to-let properties
- business premises
- land
- inherited property
If you need to pay CGT on the sale of land or a property, you must report and pay any Capital Gains Tax within 60 days.
If you’re selling property that is part of the estate of someone who’s died, you also need to report and pay Capital Gains Tax within 60 days. You’ll need to include this information when reporting the estate to HMRC.
Business Asset Disposal Relief (BADR)
Previously known as Entrepreneurs’ Relief, BADR is a reduction of your capital gains tax that you could be entitled to if you are looking to sell a business.
You may be able to pay a reduced rate of Capital Gains Tax when you sell or dispose of all or part of your business.
There are complex rules around selling part of your business, shares or securities, shares from an EMI scheme or assets lent to a company.
Find out more about specific BADR rules in our latest CGT factsheet or call Edwards today for specific advice.
Investors Relief (IR)
Investors’ Relief (IR) is aimed at external investors (excluding certain employees or officers of the company) in unlisted trading companies.
To qualify for the reduced CGT rate under ‘investors’ relief’, specific conditions must be met.
Capital Gains Tax exemptions
Every tax year, each individual is allowed to make gains up to the annual exemption without paying any CGT. To minimise your Capital Gains Tax bill you should ensure both spouses/civil partners utilise this facility.
Different rates apply for carried interest and for chargeable gains on residential property that does not qualify for private residence relief.
Find out more details about CGT exemptions in our latest CGT factsheet or call Edwards today for specific advice.
Why choose Edwards Accountants for Capital Gains Tax advice?
Whether investing privately or looking to sell other assets to make a profit, always get in touch with a qualified tax professional to find out how CGT and other taxes may affect you.
Edwards Accountants have a team of dedicated tax advisors in Walsall and across the West Midlands. Our specialist tax accountants will ensure you pay the right amount of Capital Gains Tax and advise you on how to minimise CGT and other taxes you pay through comprehensive tax planning.
Get in touch with a tax expert today to find out what we can do to help you, or download our Capital Gains Tax factsheet for more information.
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