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Capital Gains Tax
Making the complex simple
Capital gains tax (CGT) applies on the disposal of certain assets such as shares, property (but not your own home if you have always lived there), or valuable personal possessions (worth more than £6k) if sold at a profit.
It is calculated on the difference between the selling price of the asset and its original purchase price, but relief may be available to mitigate the tax liability. If you are liable to capital gains tax, you will also be eligible for an annual tax-free allowance.
Sale of your business
Selling a business can often generates a substantial capital gain. Business Asset Disposal Relief (BADR) may be available to reduce that gain. BADR reduces the capital gains tax payable to 10% on up to £ 1 million of qualifying gains made during an individual’s lifetime.
Broadly BADR is available to individuals who are actively involved in a business (whether a personally owned business or a business owned through a partnership or company). There are various conditions which have to be satisfied and it is important to seek professional advice when you dispose of a business.
Sale of shares
If you sell shares which do not relate to a business you own you may be liable for capital gains tax. Various reliefs may be available, including investors relief, which has a lifetime limit of £10 million.
Sale of properties
The sale of properties can be complex when it comes to capital gains tax, and will depend on factors such as whether the property is or was your home at any point andwhether the property was bought as an investment or development. Various reliefs are available. There are also strict requirements on how to report the gains arising from the sale of property, which includes property sold by non-UK residents. We have significant experience in dealing with all of these issues.
Other CGT considerations
Capital gains tax can be even more complex in certain specific circumstances, for example where you have only sold part of an asset i.e half of a piece of land, where there is a compulsory purchase order (CPO), where assets have been gifted, or where assets are disposed of to a trust (in which case specific reliefs may apply).
Particular complexity also arises in the case of non-resident capital gains tax where you dispose of assets whilst overseas and specialist advice should be sought.
Case Study
Capital Gains Tax
