Capital Gains Tax

Capital Gains Tax (CGT) is a tax on capital 'gains'. This means if you sell or give away an asset that has increased in value during your ownership, you may be taxable on the 'gain', otherwise known as the profit you made during your ownership of the asset.

CGT does not apply when you sell personal belongings worth £6,000 or less or, in most cases, your main home or your car. Also CGT does not apply on transfers between spouses and civil partners.

The simple rule we apply at Josef E Zbaraski FCCA Ltd is if you are buying, selling or giving away anything for significant amount money, or which is worth over £6,000; talk to us first. We may be able advise or help you to take as few simple steps before you buy or sell that will stop you paying CGT unnecessarily.

For example in the tax year 2011/2012 everyone has a CGT allowance of £10,600 (2010/11 £10,100), this means if you are about to give your son (or daughter) a painting worth £20,000, why not transfer half of the ownership to your spouse and make a joint gift? This will mean the tax payable is potentially reduced from £2,632 to nil.

Without full knowledge of your circumstances we will not always know when CGT is payable unless you tell us, you may have to pay CGT if, for example, you:

• Sell, give away, exchange or otherwise dispose of (cease to own) an asset or part of an asset.
• Receive money from an asset, for example compensation for a damaged asset.

Hence our simple rule above, if buy, selling or giving away anything for significant amount money, or which is worth over £6,000; talk to us first. Remember if we do not disclose a ‘gain’ properly on your tax return you will be liable to penalties and interest.

To help you decide on when to contact us, listed below are assets you do not have to pay CGT on:

• Your car
• Your main home - provided certain conditions are met
• ISAs or PEPs
• UK Government gilts (bonds)
• Personal belongings worth £6,000 or less when you sell them
• Betting, lottery or pools winnings
• Money which forms part of your income for income tax purposes

Important Considerations:

• If you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
• You may not give assets to your children or others or sell assets to them cheaply without having to consider CGT
• If you make a loss you may be able to make a claim for that loss and deduct it from other gains, but only if the asset normally attracts CGT
• If someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time - however if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal If you have any doubts please contact us on 08455 576786.