Capital
Gains Tax ( CGT ) - Share Dealing
About Capital Gains Tax
Capital
Gains Tax ( CGT ) calculations can be very complex because
successive governments have made repeated changes to the tax system.
You may have to pay CGT on any profits over a certain amount when
you sell assets such as shares or a property. The main exemption
from this is the sale of your main residence. You are allowed to
make gains up to a certain amount each tax year that are exempt
from CGT. For 2003/2004 it is £7,900. If your profits come
to more than your allowance, you will only have to pay tax on the
excess over the tax-free limit.
You
may have to pay CGT on any profits over a certain amount when you
sell assets such as a property. Any net taxable gain in the year
is added to your total income from other sources in the year to
determine the tax band applicable. The tax bands are 10%, 20% and
40%, and the levels are almost the same as those shown for income
tax:
- 10%
on gains up to £1,920
- 20%
on gains between £1,921 and £29,900
- 40%
on gains over £29,900
The
gain is treated as if it were additional income, the difference
being that the middle band is 20% and not the 22% applicable to
earned income. Anybody who is a higher-rate income-tax payer and
also has a taxable gain will pay 40% tax on it. But the taxable
gain may often be much less than the actual gain because of various
tax reliefs.
Normally
an asset is disposed of via a sale, but for CGT purposes your profit
could come from a gift or compensation for loss or damage to an
asset. But any money you have spent buying, selling or enhancing
your asset is not taxable. Husbands and wives are subject to CGT
separately, each with their own annual exemption and tax rates and
transfers between spouses living together are not liable to CGT,
neither is inheritance.
List
of Online Share Dealers
OCIS
provide general financial information, we urge you to consult an
Independent
Financial Adviser ( IFA )
before making any important decisions about your finances. |
