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CAPITAL GAINS TAX
CGT is levied on the profit made (or deemed to be made) on the disposal of an asset.
The profit is the 'gain' and special rules apply to calculate the 'chargeable gain'.
Every asset is a chargeable asset unless it is an 'exempt asset'.
Chargeable Exempt Assets:
Private motor vehicles Wasting assets - assets with a predictable life < 50 years
Chattels disposed of for less than £6,000
Death: deemed disposal on death but no
Gift: gain based on market value
Loss: compensation/insurance indemnity Between spouses living together:
no gain/no loss forms basis of calculation of gain
CGT Rates 20%
Rate for gains which, added to income,
Standard Rate exceed £34,500
IF gain is realised on disposal of residential property to which principal private exemption does not apply.
Disposal Price/Market Value (on date of gift)
(initial expenditure + subsequent expenditure* + incidental cost of disposal**)
* any subsequent expenditure must improve the property BUT excludes maintenance, repairs, or insurance
** incidental costs of disposal include legal fees, agent fees, etc.
Exemptions operate to reduce the amount of the gain to be charged to CGT.
The two main exemptions to consider are the annual exemption and the spouse exemption.
Other exemptions include gains made on the disposal of one's principal private dwelling house (s.222226 Taxation of Chargeable Gains Act 1992.
All individuals receive an annual exemption of £11,700 for the current tax year.
Any disposal of a chargeable asset by a person to their spouse is deemed to be a disposal on
Spouse a no gain/no loss basis. When the spouse subsequently sells the asset, CGT is charged on the
Exemption basis of the difference in value calculated by reference to the original acquisition cost.
Automatic revaluation of assets at probate value with no charge to CGT
Assets vest in PRs at the probate value but with no charge to CGT
Probate value then becomes the acquisition cost for any disposals by PRs, beneficiaries, or trustees
You can offset current CGT with previous CGT losses in order to reduce CGT payable in that tax year.
Calculating Capital Gains Tax 1 Calculate gain/loss using the basic equation.
2 3 4 5
Deduct any losses brought forward from previous years to reduce any remaining gains.
Deduct exemptions to reduce/eliminate the gain.
Claim reliefs to reduce/defer the taxation.
Apply the appropriate rates of CGT.
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