The following articles have been extracted under a licence from HM Revenue & Customs website:
Introduction
Assets and disposals
Working out the chargeable gain
Reliefs (other than taper relief)
Allowable losses
Taper relief: qualifying holding period
Taper relief: business assets and non-business assets
Working out the tapered chargeable gains
Working out the amount chargeable to CGT
Working out the tax due
Post transaction valuation checks for CGT
Indexation allowance
Taper relief on disposals of business assets on or before 5 April 2000
Introduction
This series of articles tell you the basic rules of Capital Gains Tax (CGT) for individuals.
This article shows you how to work out the total amount chargeable to CGT.
You may have come straight to this section because your total chargeable gains or your chargeable gains after losses were less than the annual exempt amount. Or you may have applied taper relief to arrive at your tapered chargeable gains.
Deducting the annual exempt amount
Your next step is to deduct the annual exempt amount in order to work out the amount chargeable to CGT.
In 2003-2004, the annual exempt amount is £7,900. It is normally increased each year broadly in line with inflation. You can look up the current level on the Internet.
If your total chargeable gains, chargeable gains after losses, or tapered chargeable gains are less than the annual exempt amount you do not have to pay any CGT.
Example
Tapered chargeable gains £6,500
Less Annual exempt amount £7,900
Amount chargeable to CGT none
If your tapered chargeable gains are more than the annual exempt amount, then you will have to pay CGT on the excess.
Example
Tapered chargeable gains £19,900
Less Annual exempt amount £7,900
Amount chargeable to CGT £12,000
You will have to pay tax on the £12,000.
Who gets an annual exempt amount?
A husband and wife are each entitled to their own annual exempt amount.
A child is entitled to her or his own annual exempt amount for gains that are made on assets that he or she owns directly, or that are held by a bare trustee.
A trust has a separate annual exempt amount. Normally that is at half the exempt amount that individuals have, but a trust for a disabled person has the same annual exempt amount as an individual. There are special rules when one person has set up several trusts.
Personal representatives have the same annual exempt amount (see article 10 – Working out the tax due) as individuals for the year of death and the next two years, but nothing after that.
What do I do next?
The next section tells you how much CGT you will actually have to pay on the
amount chargeable to CGT.
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