What is your Capital Gains Tax Allowance?
The Capital Gains Tax Allowance is your annual tax-free allowance for Capital Gains Tax or CGT.
The Capital Gains Tax allowance is also known as the ‘Annual Exempt Amount’, beyond which you may be liable to CGT.
The current (May 2010) Capital Gains Tax Allowance for the tax year 2010-11 is £10,100 for an individual and £5,050 for most trustees. The whole area of CGT is, however, under review by government at the time of writing.
Do you need advice on capital gains tax? Get expert help from our advisers on 0800 678 5929
When is CGT due?
Capital Gains Tax is due if you sell, give away, exchange or otherwise dispose of an asset or part of an asset. It may also apply to money you gain from an asset in other ways, for instance, to compensation received for a damaged asset.
It is important to note that Capital Gains Tax applies, not to the amount of money you receive through the sale of an asset, but to the gain you made on that asset – in other words, the change in the value of the asset between buying and selling. As an example of capital gains, if you bought shares for £20,000 and after many years sell them for £38,000, then you have made capital gains of £18,000.
In this case, your Capital Gains Tax Allowance of £10,100 would be used up, leaving you liable for CGT on the remaining £7,900.
Which assets attract Capital Gains Tax?
Capital Gains Tax applies to gains from selling a range of assets. There is a Capital Gains Tax on property, where that property is not your main home. This includes land, buildings and leases. The Capital Gains Tax on property also applies to capital gains from the sale of second homes, or buy-to-let properties.
CGT also applies to the sale of shares, unit trusts and other investments, antiques, jewellery and other personal possessions worth more than £6,000, either singly or as a collection.
CGT applies to the sale of a business, trade marks, and even ‘goodwill’, and Capital Gains Tax on property applies to business premises.
Capital Gains Tax also applies to assets you hold abroad, such as a holiday home, shares in a foreign company, or land.
What is the rate of CGT on gains above the Capital Gains Tax Allowance?
At the moment (August 2010) CGT applies to all eligible gains at 18% or 28%, depending on your total taxable income and gains.
Assets which are NOT subject to CGT are your car, ISAs, UK government bonds, personal belongings sold for less than £6,000, betting / lottery / pools winnings, and money which forms part of your income for Income Tax purposes. While the sale of your main home is technically liable to CGT, usually it will not apply, as your main home generally qualifies for Private Residence Relief.
Do you Capital Gains Tax help? Request financial advice online or call 0800 678 5929
