It is important to understand what Capital Gains Tax is and the changes that were made to this in 2017. Capital Gains Tax is a tax that taken from any profit that you make when you sell (or ‘dispose of’) something (an ‘asset’) that has increased in value. It is not based on the amount of money you receive.
Examples of the types of ‘assets’ that can incur Capital Gains Tax are:
- Personal possessions worth over £6000 (Does not apply to cars)
- A property if it is not your main home
- Your home if you used it for business or let it out
- Shares that are not ISA or PEP
- Any business assets such as equipment
The current rates of Capital Gains Tax are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain disposals that are mainly chargeable gains on residential properties with the exception of any element that qualifies for private residence relief (i.e. your main home).
There are two types of disposal that potentially qualify for a 10% rate, both of which have a lifetime limit of £10 million for each individual:
- Entrepreneurs’ Relief (ER). This is targeted at working directors and employees of companies who own at least 5% of the ordinary share capital in the company and the owners of unincorporated businesses.
- Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies. CGT annual exemption
The Capital Gains Tax annual exemption is £11,300 for 2017/18 this will be further increased to £11,700 in 2018/19.
The government had previously suggested that capital gains tax would have to be paid within 30 days of the sale of a residential property but this proposal has now been deferred until April 2020.
If you want to find out more about how Capital Gains Tax can affect you or your business then please do get in touch by calling 01623 490120 or email us at