Capital Gains Tax
At PKPI Chartered Accountants, we understand that Capital Gains Tax (CGT) can seem like a complex and daunting aspect of finance. However, with our expert guidance, you can navigate the intricate world of CGT, minimize your tax burden, and ensure that your assets are handled tax-efficiently
What is Capital Gains Tax?
CGT is a tax imposed on the profit or gain realized from selling an asset. If your gains for the tax year do not exceed your yearly tax-free allowance, you are not required to pay CGT. It's essential to note that gains made on the sale of assets like businesses, shares, or properties often surpass the available tax-free allowances, making careful planning and expert advice vital for efficient tax management.
The Capital Gains Annual Allowance
For the 2023/24 tax year, the personal CGT allowance stands at £6,000, marking a significant reduction from the previous year's £12,300. Furthermore, it is scheduled to decrease to £3,000 in the 2024/25 tax year. This annual allowance represents the maximum amount of gains an individual can realize from asset sales within a tax year before being subject to taxation. In certain cases, married couples can combine their allowances, emphasizing the importance of end-of-year tax planning to leverage available tax reliefs effectively.
Who Gets the Annual Exempt Allowance(AEA)
The AEA is available to several categories of individuals, including:
1. Most individuals who live in the UK: This includes regular UK residents who are liable for CGT.
2. Executors or personal representatives of a deceased person’s estate: During the administration period, these individuals can make use of the full AEA.
3. Trustees for disabled people: Trustees managing assets on behalf of disabled individuals can also benefit from the AEA. A lower AEA rate applies to most other trustees.
Capital Gains Advice for Individuals
We provide tailored advice to individuals on managing their CGT liabilities. This includes dealing with the disposal of personal possessions, shares, and, often, the sale of secondary properties. Whether you're navigating the complexities of a buy-to-let property or have become an accidental landlord through marriage or inheritance, our expert team ensures you receive guidance on the most tax-effective methods to minimize your individual tax burden.
Capital Gains Advice for Businesses
Our corporate team specializes in advising businesses and shareholders on their CGT liabilities, which may arise when part or all of a business or its assets are sold. This can encompass various assets, including land and buildings, fixtures and fittings, plant and machinery, shares, registered trademarks, and the sale of goodwill.
Capital Gains Tax Rates
10% and 20% tax rates for individuals: These rates apply to most gains, excluding residential property and carried interest.
18% and 28% tax rates for individuals for residential property and carried interest: If you're dealing with residential property or carried interest, different rates apply.
20% for trustees or personal representatives of someone who has died: For non-residential property, these trustees are taxed at 20%.
28% for trustees or personal representatives of someone who has died for disposals of residential property: For residential property, this rate applies.
10% for gains qualifying for Business Asset Disposal Relief: This used to be known as Entrepreneurs Relief and provides a lower tax rate for qualifying gains.
28% for Capital Gains Tax on property where the Annual Tax on Enveloped Dwellings is paid: In such cases, the annual exempt amount doesn't apply.
20% for companies (non-resident Capital Gains Tax on the disposal of a UK residential property): Companies dealing with non-residential property are taxed at this rate.
Our team of highly experienced accountants have their fingers on the pulse of taxes and reliefs and are eager to help you make the most of your money by minimising your tax exposure and maximise your tax efficiency. Our expertise and experience will help you better manage your money in ways you can understand and safely implement.
What is Capital Gains Tax
Capital Gains Tax is the tax due on an asset when it is sold if it has increased in value. The gain you make is taxed, rather than the amount of money that you receive.
Some assets are tax free
Typical examples of when you will be subject to Capital Gains Tax is when you sell a property that is not your main residence or sell stock shares. Business are also subject to Capital Gains Tax.
There is also a tax-free exemption of £12,300. If your assets have appreciated significantly, then it is expected you'll exceed this allowance and will be exposed to Capital Gains Tax. To make things more complicated, the rate at which you pay CGT varies from 10% to 28%, depending on whether you're on a higher income tax band or if the gain is property related.
What you don't pay Capital Gains Tax on:
You're selling your main residential property
You're selling a car
Your possession is worth less than £6,000
You're gifting money to a spouse or civil partner or a charity
The gain is within your tax-free allowance
What is Inheritance Tax?
Inheritance Tax is a tax on the estate of someone who'd died.
To be applicable, the estate being passed on must be above the £325,000 threshold. The Inheritance Tax is applied at 40% of anything over the £325,000.
As with all types of tax there are exemptions and exclusions, so its important to discuss a plan for inheritance tax with your accountant ensure your hard-earned savings can be passed on in a tax-efficient manner.
Passing on a home
You can pass a home to your husband, wife or civil partner when you die with no inheritance tax to pay
If you own your home, your tax-free threshold can increase to £500,000 if:
you leave it to your children or grandchildren
your estate is worth less than £2 million