Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that is taxed, not the amount of money you receive.
Disposing of an asset includes:
- Selling it
- Giving it away as a gift, or transferring it to someone else
- Swapping it for something else
- Getting compensation for it – like an insurance payout if it’s been lost or destroyed
Everyone has an annual CGT exemption allowance. For the 2018-19 tax year this is £11,700 and CGT is payable if an individual’s total gains in a tax year exceed this annual exemption.
Assets exempt from CGT include:
- An individual’s principal private residence
- Private motor vehicles
- National Savings Certificates and Premium Bonds
- Gambling winnings
- Assets gifted to a charity or certain national institutions such as museums
- Chattels (Personal possessions)
The CGT allowance is one of the most under-used tax allowances and is lost each tax year if not utilised. Good tax planning advice – and the right investment structure to enable full use of allowances – can make a significant difference to the your total return over time.
Past performance is not a guide to future returns. The value of investments can fall as well as rise. Investors may get back less than invested.