Capital gains tax is a tax payable when someone disposes of any asset at a profit. Capital assets may include shares, property, etc. Individuals may be required to pay capital gains tax if they dispose of a capital asset at a profit which is above the annual exemption limit for the tax year.
The disposal of following most commonly disposed assets may be subject to capital gains tax such as:
- Disposal of residential or commercial property
- Disposal of shares in a personal trading company
- Disposal of stocks or bonds
- Sales or grant of leases
- Any other capital asset
How the capital gains tax is calculated?
The calculation of capital gains tax is very straightforward. We simply take proceeds of sales and deduct all costs of acquisition to leave us with the capital gain.
The purchase price and the costs related to buying and selling the asset are usually deductible when calculating the gain.
Individual taxpayers are entitled to an annual allowance each year and any gains more than this allowance are taxable at capital gains tax rates applicable to the individuals.
Capital Gains Tax Rates
There are different rates of tax on gains from residential property than you do on other assets.
If you are a higher or additional rate taxpayer
- 28% on your gains from residential property
- 20% on your gains from other chargeable assets
If you are a basic rate taxpayer and the whole of your gains falls within basis rate band
- 18% on your gains from residential property
- 10% on your gains from other chargeable assets
Tax Reliefs
There are many tax reliefs available on the disposal of assets such as:
- Principal private residence relief (PPR)
- Letting relief
- Entrepreneurs’ relief
- Rollover relief and deferral relief
- Gift relief
- EIS and SEIS reinvestment relief etc
- Set-off against current year or brought forward losses
- The above reliefs can result in a significant tax savings. We would therefore strongly advise you to contact our team at Martax for timely and tax saving advice.
How Martax Can help you?
- Advice on claiming all valid allowable cost against the gain
- Advice on how the capital gains tax payment can be delayed
- Maximizing the use of annual exemption allowance
- Ensuring that all the relevant tax reliefs have been claimed to reduce or eliminate the taxable gain
- Calculation of calculate gains tax liability
- Preparation of your tax return including your capital gains if any
- Advice on how and when to make the capital gains tax payment
