Pixel

Capital Gains Tax – Your Top Questions Answered

Gary Green
Gary Green
September 14, 2020

The complexities of Capital Gains Tax can be challenging to get your head around. We often receive many enquiries, with questions such as...

What is Capital Gains Tax? What do you pay Capital Gains Tax on? Do I have to pay Capital Gains Tax on a property I joint own? Do I have to pay Capital Gains Tax on an inheritance? What is exempt from Capital Gains Tax? What are Capital Gains Tax rates?

Read on for answers to these questions.

What is Capital Gains Tax?

Capital Gains Tax is the tax you are charged on the profit you make from ‘disposing of’* an asset which has appreciated in value. A good example of this is when you buy a house, fix it up and then sell it on for more money than you spent on buying and fixing it up. The profits of this would be taxed and that is Capital Gains Tax.

* Disposing of an asset includes the following:

  • selling it;
  • giving it away as a gift (except inheritance, see below);
  • swapping it for something else;
  • getting compensation for it. I.e. An insurance pay-out if it’s been lost or damaged.

What do you pay Capital Gains Tax on?

  • Property that you don’t live in;
  • Possessions worth more than £6000, cars are exempt from this;
  • Property that you live in, if it’s very large, if you’ve rented part of it out, or if you’ve used it for business;
  • Shares (ISAs and PEPs are exempt from this);
  • Business assets;
  • Cryptocurrency or bitcoin sales in some cases but the rules are complicated and rapidly changing so you should seek more guidance.

Do I have to pay Capital Gains Tax on a property I joint own?

If you joint own something that falls within the categories listed above, then you have to pay Capital Gains Tax on the profits you received from your portion of the sale.

Do I have to pay Capital Gains Tax on an inheritance?

No. Inheritance Tax is normally paid by the estate of the person who has died. However, if you later decide to dispose of the asset, then at that point, you would have to pay Capital Gains Tax.

What else is exempt from Capital Gains Tax?

  • Lottery wins, betting wins or pools wins;
  • UK Government gilds and premium bonds;
  • Gifts to your husband, wife, civil partner or a charity;
  • Any gains that are below the tax-free allowance amount (£12,300 for individuals)

What are Capital Gains Tax rates?

On properties the rates are as follows:

  • No Capital Gains Tax on selling the property which you live in;
  • If you pay a higher rate of income tax, then it’s 28% on the gains from a residential property and 20% from the gains from other chargeable assets;
  • If you pay the basic rate of income tax then the rate is calculated based on the size of the gain, your taxable income and if the gain is from a residential property or other assets. The rules can be quite complicated so it’s best to seek advice.

Some other points to consider in terms of Capital Gains Tax are as follows:

  • If the disposal of an asset is eligible for another form of tax, for example, inheritance tax, then a credit is given to avoid being double charged.
  • Non-UK residents, who remain non-resident for a qualifying time period, are not charged Capital Gains Tax on UK assets
  • Records should be kept as to when the asset was disposed of in order to ensure that the gain is declared in the correct tax year.

The above article answered the following questions: What is Capital Gains Tax? What do you pay Capital Gains Tax on? Do I have to pay Capital Gains Tax on a property I joint own? Do I have to pay Capital Gains Tax on an inheritance? What is exempt from Capital Gains Tax? What are Capital Gains Tax rates?

As you can see, the rules regarding Capital Gains Tax are complicated so it is advisable to seek professional advice. For more details or to discuss further, please feel free to get in touch with our experienced team who will be happy to assist you.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
May 26, 2021
The Most Common Tax Breaks for Small Businesses in the UK

A significant number of small businesses in the UK do not take full advantage of HMRC-approved...

May 24, 2021
The Complete Small Business Checklist for Hiring Your First Employee

There are a multitude of rules and regulations that you must be aware of when you...

May 21, 2021
Dealing With a Deceased Person's Estate - With or Without a Will

Everything you need to consider when dealing with a deceased person's estate and paying the relevant...

May 19, 2021
All You Need To Know About Workplace Pensions

A workplace pension is a pension scheme offered to employees by employers. Some workplace pensions are...

May 17, 2021
Tax Rates, Thresholds & Allowances for Employers in 2020-21/2021-22

All the tax rates, thresholds and allowances set by HMRC that employers should be aware of...

May 14, 2021
How to Fill Out a PAYE Settlement Agreement (PSA) Form: P626 & PSA1

A PAYE Settlement Agreement (PSA) allows employers to make one annual submission and payment to cover...

May 13, 2021
How Easy Is It to Get Funding as a Startup in the UK?

Financing a new startup business is one of the most crucial aspects of helping a new...

May 12, 2021
Benefit in Kind (BIK) Tax Rates: Calculating Tax on Employee Company Cars

The tax benefits of driving a company car have been steadily reduced over many years. Most...

May 11, 2021
The Essential Guide to Tax Relief Rates on Pension Contributions

You can claim tax relief for your private pension contributions worth up to 100% of your...

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2021 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram