It’s likely you’ve heard of the term Capital Gains Tax, but what actually is it and what does it mean for you financially?
Read on to find out more about Capital Gains Tax from the specialists at BW Medical.
What is Capital Gains Tax?
If you sell an asset that has increased in value while in your possession, you will be taxed on the profit made at the time of sale. This is known as Capital Gains Tax.
When it comes to ‘disposing’ of an asset, the gain you make upon the sale is the money that is subject to tax – rather than the total amount that you receive.
You can ‘dispose’ of an asset in a number of ways, including selling it, transferring it to someone else and more.
Our tax experts can answer any questions you may have about Capital Gains Tax and what it means for your finances.
What do I have to pay Capital Gains Tax on?
There are a number of assets that are subject to Capital Gains Tax when ‘disposed’ of, including:
- The majority of personal possessions worth over £6,000
- Business-related assets
- Any shares (excluding those in an ISA or PEP)
- Your home – if it is particularly large, used for business or you’ve let it to another individual
- Any additional property.
It is worth noting that you do not have to pay Capital Gains Tax on any tax-free assets, such as a gift to your legal partner, a gift to a charity or a lottery win.
You are also exempt from Capital Gains Tax if your yearly gains do not exceed your tax-free allowance.
Capital Gains Tax allowance
Capital Gains Tax is only paid if your yearly gains exceed your Annual Exempt Amount – also known as your tax-free allowance. For the majority of people, this is £12,570 per annum.
Currently, as an individual, your Capital Gains tax-free allowance comes to £3,000. If you are operating a trust, your Capital Gains tax-free allowance drops to £1,500.
Contact us
If you have any further queries or concerns about Capital Gains Tax, get in touch with our expert team by calling 0191 653 1022 or visit our contact page.