Capital Gains Tax
Some of the things we own go up in value, if they were large purchase cars, house, boats or antiques and paintings they may go up by a significant amount obviously the may also go down in value. You may keep much of this growth but if it goes above a certain level you will be taxed. This is called Capital Gains Tax.
It is only due on selling these large capital items. There are allowances on these gains and 2 different rates depending on the growth. Here are the current Capital Gains Tax allowances as defined by the HMRC
Capital Gains Tax Allowances
| Allowance | Normal Rate Tax Payers | Higher Rate Tax Payers | ||
|---|---|---|---|---|
| Payment Rate | (income less than £34,370) | (income greater than £34,370) | ||
| Tax Year | Allowance | Payment Rate | Allowance | Payment Rate |
| 2004 - 2005 | 8200 | 20% | 8200 | 40% |
| 2005 - 2006 | 8500 | 20% | 8500 | 40% |
| 2006 - 2007 | 8800 | 20% | 8800 | 40% |
| 2007 - 2008 | 9200 | 20% | 9200 | 40% |
| 2008 - 2009 | 9600 | 18% | 9600 | 18% |
| 2009 - 2010 | 10100 | 18% | 10100 | 18% |
| 2010 - 2011 | 10100 | 18% | 10100 | 18% (up to 22 June) 28% (after 22 June) |
| 2011 - 2012 | 10600 | 18% | 10600 | 28% |
| 2012 - 2013 | 10600 | 18% | 10600 | 28% |
| 2013 - 2014 | 10900 | 18% | 10900 | 28% |
| 2014 - 2015 | 11000 | 18% | 11000 | 28% |
The table shows clearly how the rates have changed over the years and furthermore how complicated our tax system can be. Many believe that capital gains tax as part of the overall tax regime in the United Kingdom comprises one of the most complex tax systems in the world.
Capital Gains Tax -Practical tips
Capital gains tax can be ameliorated by taking into account any sums spent on maintenance or restoration this might be the renovation of a property involving tradesmen materials and professional fees.
Where property is involved capital gains tax is not due on the property that you live in, where practical capital gains tax can be avoided if you reside in the property that made capital growth over a 7 year period.
Keep good records, including dates of transactions, commissions, fees materials in a format that is easy to understand. A spreadsheet such as the one below is useful both for you and for anyone dealing with your capital gains tax affairs.
| Capital Gains Worksheet | |||
| A. | Description of Security | Shares, Property, Antiques | |
| B. | Date Purchased | 21 June 2008 | |
| C. | Cost to buy | £4,000.00 | |
| D. | Buy Commission | £500.00 | |
| E. | Date Sold | 14 August 2012 | |
| F. | Selling Price | £7,500.00 | |
| G. | Sell Commission | £600.00 | |
| H. | Costs Incurred (Total) | C + D + G | £5,100.00 |
| I. | Capital Gain | Selling price – Costs Incurred | £2,400.00 |
| J. | Short-Term or Long Term | Long Term | |