CAPITAL GAINS TAX
- CGT is levied on the profit made on the disposal of an asset
- The profit is the ‘gain’ and rules apply to calculate the ‘chargeable gain’
Chargeable - Individuals - Personal Reps
Persons - Business Partners (PRs)
- Trustees
Chargeable Assets Chargeable Assets:
Every asset is a chargeable asset unless it is an exempt
asset
Exempt Assets:
This includes:
- Private motor vehicles
- Cash
- Wasting Assets – assets with a predictable life less
than 50 years
- Chattels disposed of for less than £6k
Disposals - Sale
- Gift: gain based on market value
- Loss- compensation/insurance indemnity forms
- Death- deemed disposal but no CGT payable
- Between spouses living together- no gain/no loss
CGT Rates
10% - Standard rate
20% -Rate for gains which, added to income, exceed £37,700
OR
Residential property-
18%- gains which are below the basic rate threshold
28%- for any gains which exceed the basic rate
PRs-
Taxed at 20%
For residential property- 28%
Indexation Allowance
EXAMPLE: The gain before indexation is £97,000. The indexation
allowance is applied to the historic costs, here the acquisition cost and
the incidental costs of the acquisition (£328,000 in total) to remove the
inflationary element of the gain and deducted from this to give the
chargeable gain. £328,000 x 0.070 = 22,960, 97,000 – 22,960 = 74,040.
-
Basic Equation
Disposal price/market value (on date of gift)
Less
- CGT is levied on the profit made on the disposal of an asset
- The profit is the ‘gain’ and rules apply to calculate the ‘chargeable gain’
Chargeable - Individuals - Personal Reps
Persons - Business Partners (PRs)
- Trustees
Chargeable Assets Chargeable Assets:
Every asset is a chargeable asset unless it is an exempt
asset
Exempt Assets:
This includes:
- Private motor vehicles
- Cash
- Wasting Assets – assets with a predictable life less
than 50 years
- Chattels disposed of for less than £6k
Disposals - Sale
- Gift: gain based on market value
- Loss- compensation/insurance indemnity forms
- Death- deemed disposal but no CGT payable
- Between spouses living together- no gain/no loss
CGT Rates
10% - Standard rate
20% -Rate for gains which, added to income, exceed £37,700
OR
Residential property-
18%- gains which are below the basic rate threshold
28%- for any gains which exceed the basic rate
PRs-
Taxed at 20%
For residential property- 28%
Indexation Allowance
EXAMPLE: The gain before indexation is £97,000. The indexation
allowance is applied to the historic costs, here the acquisition cost and
the incidental costs of the acquisition (£328,000 in total) to remove the
inflationary element of the gain and deducted from this to give the
chargeable gain. £328,000 x 0.070 = 22,960, 97,000 – 22,960 = 74,040.
-
Basic Equation
Disposal price/market value (on date of gift)
Less
