If the asset was owned before April
1998, the cost is adjusted for the effect of inflation
up to that month before working out the gain. For
assets bought since, the gain is generally the excess
of proceeds over cost.
CGT is self-assessed, reported and paid in conjunction
with income tax, and the details are given on the
Personal Taxation page. |
| |
|
For disposals since April 1998, gains
are reduced according to the length of time for
which the asset has been owned. Assets owned before
April 1998 only count the complete years of ownership
after 5 April 1998, plus one year for a 'non-business
asset' which was owned on 17 March 1998.
Business assets (BA) have a more generous rate of
taper relief:
* any shares in an
employer company, which has to be a trading company
if the employee owns over 10%
*
any shares in unquoted trading companies
* 5% holdings in quoted trading companies
* buildings or other assets let by the
owner for use by an unquoted trading company or
unincorporated trade
* assets of an
unincorporated business owned by a partner or sole
trader.
Non-business assets (NBA) include most non-employee
quoted shareholdings and residential investment
properties.
The percentages of a gain which are chargeable for
disposals in 2007/08 are: |
|
|
|
|
|
|
|
|
| BA% |
|
|
|
|
100 |
50 |
25 |
|
|
|
|
|
|
|
|
| NBA% |
|
|
|
100 |
95 |
90 |
85 |
|
|
|
|
|
|
|
|
| NBA% |
|
|
80 |
75 |
70 |
65 |
60 |
|
| Taper relief is calculated after applying
all other reliefs (eg losses), apart from annual
exemption. The effect of taper can be expressed
as a reduction in the rate of tax - the effective
rate for a 40% taxpayer on a BA owned for two
years is only 10%, because the gain is reduced
to 25% of the full amount. The rate on NBA falls
to 38% with 5% taper, 36% with 10%
taper, etc. |
| |
|
| A number of types of asset are exempt
from CGT, including chattels (tangible movable
property) which are bought and sold for less than
£6,000; cars; and the taxpayer's
only or main residence. A taxpayer with more
than one residence can choose which is to be exempt,
but it is not possible to apply the exemption to
an investment property which is rented out. |
| Gifts to charity are not charged
to CGT, and gifts of quoted shares and land also
enjoy an income tax relief (see Personal
Taxation). |
| Deferral of gains is allowed
on some types of reinvestment, such as subscription
for new EIS shares (see Investment
Reliefs). |
