The following articles have been extracted under a licence from HM Revenue & Customs website:
Introduction;
Assets and disposals;
Working out the chargeable gain;
Relief’s (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 you’re 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 theamount chargeable to CGT.
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