5 things you need to know about Capital Gains Tax

Understanding taxes can be daunting but it is crucial to having a good handle on your finances.

Capital Gains Tax is paid on the profit when you sell, transfer or ‘dispose of’ something

This is often when you sell something that has increased in value, which generates a financial gain.

It will be the gain you make that you have to pay tax on, not the total amount of money you receive.

You may have to pay Capital Gains Tax on business assets

If you run an unincorporated business, such as a partnership or you are a sole trader, you will be personally liable for any gains on the sale of an asset.

This can include if you own a shared asset with someone else, such as a business partner, you must pay Capital Gains Tax on your share of the assets.

You must keep records to determine your gains

You will have to collect records of any gains made in a tax year, which you must keep for a year after the Self-Assessment deadline.

Limited Companies and their gains are taxed differently

While companies don’t technically pay Capital Gains Tax they do pay corporation tax on any profits made from doing business, investments and selling assets for more than they cost.

This last source of income is known as chargeable gains and is taxed at a company's regular rate of Corporation Tax.

The marginal rate of tax you pay determines how much Capital Gains Tax you owe

Regular assets are taxed at a rate of 10 per cent if you are a basic rate taxpayer, or 20 per cent if you are a higher or additional rate taxpayer.

Gains on the sale of a second home, which doesn’t benefit from Principal Private Residence relief, are taxed at higher rates of 18 per cent for basic taxpayers, and 20 per cent for those on higher marginal rates.

If you need advice on related matters, contact us today.