Capital Gains

What is Capital Gain Tax?

The Capital Gain Tax (CGT) is a federal tax on the monetary gain after purchase or sale of an asset. CGT applies on sales gains that are more than the initial purchase amount of the item. Businesses like shares, land, antiques etc usually attract CGT though tax may also be applicable on compensation and prize winnings. The Tax year is from 6 April of present year to 5 April of the next year.

Are there Tax Exceptions?

There are exceptions to tax if an individual’s gains amount to less than £9,600 in 2007-2008.

In selling or passing of personal property that is less than £6,000 or donation of assets to registered charities and also receipt of money against sales from Isas, Premium Bonds, or lottery, betting and personal injury compensations, CGT exceptions are applicable.

CGT is not applicable on inheritance unless asset is re-sold later.

Can you Avoid CGT?

You can avoid CGT to an extent that postpones the payment of tax to a later date.

• If you are legally married, you may transfer assets to your partner to avoid tax but on re-sell of those assets later, CGT has to be paid.
• You can reinvest gains up to £200,000 under the Enterprise Investment Scheme.
• You can reduce your CGT on some assets by deducting loss (encountered while disposing one asset) from the capital gains from other assets.
• Avail the private residence relief, business asset rollover relief and business asset gift relief to reduce CGT.

Tax calculations can be complex. Speak to your accountant or local tax office for applicable tax and their payments.