Capital Gains Tax Solicitors

A Brief Overview of Capital Gains Tax

Simply put, Capital Gains Tax (CGT) is the type of tax levied on the profit you make when you sell an item, give it away as a gift or otherwise cease to own it. At Rollingsons Solicitors Ltd, our London lawyers provide advice on all aspects of Capital Gains Tax. Our goal is to help reduce our clients' tax liabilities and also to make sure that clients are aware of any taxes they owe.

Our legal team has put together the following material designed to give you a brief overview of Capital Gains Tax in the UK. We encourage you to contact us with any questions or concerns you may have.

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When Do I Have to Pay Capital Gains Tax (CGT)?

As a general rule, if you sell something for more than you paid for it, you have to pay CGT. As of June 2010, if you pay the lowest income tax rate, then your CGT rate will be 18%. If your income is such that you pay more than the basic rate, then your CGT rate will be 28%. The sale of shares, land, buildings, part of a business and expensive antiques or jewellery are the sorts of things that will usually attract CGT liability. You may also owe this tax if you merely give something away or receive compensation or prize money.

CGT Exemptions

  • Gains that come to less than £10,600 for the tax year 2011-2012
  • Selling or otherwise passing on personal belongings that are worth less than £6,000, or giving assets to a registered charity
  • Selling your private car or your main home, or receipt of money from Isas, Premium Bonds, betting, lottery or pools winnings, or personal injury compensation

How to Avoid Capital Gains Tax

It is possible to arrange your affairs so that you can avoid CGT without riling the taxman. Most techniques defer CGT to a later date or transfer it to another person. Some common methods to defer or avoid CGT include:

  • Transferring your assets to your spouse or civil partner. This does, however, transfer the legal ownership of the asset and CGT will have to be paid if and when the recipient later sells it.
  • Reinvesting gains under the Enterprise Investment Scheme
  • Offsetting a loss: For example, if you make a loss when disposing of one asset that would attract CGT, you may be able to deduct this loss from capital gains that you have made on other assets.

Capital Gains for Entrepreneurs

In response to concern that the capital gains tax would harm or dampen entrepreneurial spirit, the Chancellor announced a somewhat different CGT programme for business owners. Essentially, a business owner with a stake of more than 5% in his or her company will only pay 10% CGT on the first £5 million of lifetime gains when he or she sells part of or all of the business.

Calculating Your CGT Liability

  • First, add up all the gains you have made from the sale of assets during the tax year, from 6 April one year to 5 April the next year.
  • The tax applies to the gain rather than the amount you sell it for. Therefore, if you bought shares for £500 and sold them for £2,000, you have made a gain of £1,500.
  • Then, subtract costs, as well as any losses made on the disposal of other assets. You may also subtract the annual exempt amount, currently £10,600 for every individual.
  • You pay 18% or 28% on anything left, depending on your applicable rate.

When You Give an Item Away

If an asset has increased in value since you bought it, you may have to pay CGT if you give it away, even if you do not receive any money for it or receive less than it is worth.

For example, say you bought a flat for £75,000 and allowed a relative to use it before deciding to sign the flat, now worth £100,000, over to that relative. You have made a capital gain of £25,000 and must pay CGT on that amount. It does not matter whether you receive any money for the flat from the relative.

Paying the Taxman

  • If you do not usually complete a tax return but have a gain or loss to report, you need to contact your local tax office and ask for a self-assessment tax return, including the relevant pages for CGT.
  • If you already receive a self-assessment tax return, it will tell you if you need to request and fill in the CGT pages.
  • You need to tell your local tax office in writing by 5 October if you have gains or losses to report from the previous tax year.

CGT on Inheritance

You do not have to pay CGT if you inherit something until or unless you later sell or give away the asset. For example, if a relative's Will leaves you £6,000 of shares, you do not have to pay any CGT. But if you sell them later for £9,000, you may have to pay CGT on the gain of £3,000.

Contact an Experienced Kent Solicitor to Discuss CGT and Its Exemptions

We can offer you an initial consultation at a reduced rate. To discuss your case please call 080 8159 5251 or contact Neil Acheson-Gray, Head of the Department, electronically.

Wills, Probate & Inheritance Team

 NameOffice(s)Phone Number
Joyce Akori 02076114848
Iftekhar Shah 02076114848

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