Understanding Capital Gains Tax

Understanding Capital Gains Tax is crucial for anyone who is looking to use up their tax free allowances each year.

Capital Gains Tax is a tax payable on profits made from selling or disposing of something, an asset that has increased in value. The tax is calculated on the profit or gain you make when you sell the item.

For example if you buy a painting worth £5,000 and sell it for £20,000 the gain you have made is £15,000. You are only taxed on the gain, in this case £15,000.

Some assets are tax free and you do not have to pay Capital Gains Tax if all your gains are under your tax free allowance.

Items that are outside capital gains tax

You only have to pay Capital Gains Tax on your total gains above an annual tax-free allowance.

• You do not usually pay tax on gifts to your husband, wife, civil partner or a charity.
• ISAs or PEPs
• UK government gilts and Premium Bonds
• Betting, lottery or pools winnings

You also do not have to pay Capital Gains Tax if all your gains in a year are under your tax-free allowance.

If you are looking at disposing assets in the current or next tax year talk to us about how you can do this in the most tax efficient way.