Capital Gains Tax advice

Capital gains tax can apply on the disposal of assets but relief is widely available to mitigate the tax liability. If you are liable to capital gains tax, you will be eligible for the annual tax-free allowance of £12,300 (for the 2020/21 tax year) which allow you to make a certain amount of gains each year before you have to pay tax.

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General advice

We can provide capital gains tax advice and guidance on your capital gains tax liability, the relevant rates and eligibility for relief through allowances and exemptions. We can advise you on the capital gains tax implications before a transaction occurs to ensure that no planning opportunities are missed.

Property

We are highly experienced in providing capital gains tax advice to buy-to-let landlords or property owners of second homes, together with non-UK resident landlords affected by the non-resident CGT regime.

BADR

Business Asset Disposal Relief is a valuable relief which can mean that you pay 10% rather than 20% when you dispose of your business. There are various conditions to be met and through our capital gains tax advice experts we can provide insight on whether you will qualify for this relief.

What is capital gains tax and when do I pay it?

Capital Gains Tax (CGT) is payable on the gain realised on the disposal of any ‘chargeable asset’. This includes most personal possessions worth more than £6,000 (cars not included), business assets, property that is not your main home (exemptions apply) and shares held outside an ISA. Gifts to a spouse, civil partner or charity are typically exempt from capital gains tax.

You only have to pay capital gains tax on your total gains above an annual tax-free allowance which is currently £12,300 for individuals and £6,150 for trustees. The current capital gains tax rates are 18% or 28% for basic and higher/additional rate taxpayers respectively.

At ETC Tax we are specialists in Capital Gains Tax advice

Depending on the asset, you may be able to reduce the tax due by claiming a relief.

A number of business reliefs are available and should be taken advantage if the relevant conditions apply:

BADR (the reformed Entrepreneurs’ Relief)

This relief reduces the capital gains tax payable to 10% on up to £1million of qualifying gains made during a lifetime. Various conditions must be met and broadly BADR is available to individuals who are actively involved in a business, whether this is a personally owned business, or through a partnership or company.

Investors’ relief

This applied to disposals made after 6 April 2019. You can also enjoy the 10% rate of capital gains tax when investing an unquoted company which you do not work for. You will need to have subscribed for the shares after 16 March 2016 and hold them for at least 3 years. There are strict rules as to your involvement with the company which you hold the shares but gains of up to £10million can potentially qualify for this relief.

Hold-over relief

If you give a business asset or shares in your company to another individual, the gain can be held over, so you don’t need to pay capital gains tax at the point of the gift. Instead, the gain is deferred, and the recipient of the gift will pay capital gains tax on the gain realised when they dispose of the asset.

Incorporation relief

When you transfer your unincorporated business to a company, you would normally pay capital gains tax on the gain realised on any chargeable assets. If you receive shares in return for the transfer of assets, you can roll over the gain into the value of those shares. This defers the capital gains tax payable until you eventually dispose of those shares. Note that this relief is available to non-trading businesses as well as trading business, which will include property.

Seeking capital gains tax advice will help ensure that you are meeting your liabilities in the most tax efficient manner.

FAQs

My asset is in the UK and I am resident overseas – am I affected by capital gains tax?

You have to pay capital gains tax on gains you make on the disposal of residential and non-residential property in the UK. From 6 April 2019, capital gains tax may also apply on gains made on ‘indirect disposals’ of UK land which (broadly) involves disposals of interests in companies (such as shares) by non UK residents with a substantial (25% or more) interest in a company which derives at least 75% of its gross asset value from UK land.

You generally will not pay capital gains tax on other UK assets e.g. shares in UK companies, unless you return to the UK within 5 years of leaving.

Does a capital gains tax liability arise when someone dies?

When you inherit an asset, inheritance tax is usually paid by the estate of the person who has died. If the asset is disposed of by the executors during the period of administration, then any tax due will be dealt with by the executors as part of the estate’s tax affairs.
If you inherit the asset, you will only be liable to capital gains tax personally if you dispose of the asset in the future.

What is the difference between capital gains tax and income tax?

When you acquire an asset to use or hold for a period of time, the profit you make on the disposal of the asset will be treated as a capital gain and subject to capital gains tax.
When you acquire an asset with the intention of selling it for a profit, the transaction is treated as trading and you should pay income tax on the profit you make on sale.

Does capital gain tax affect overseas assets?

If you are resident in the UK and your asset is overseas you may still have to pay capital gains tax. We can advise on the rules and also the specific rules governing this area for non-domiciled UK residents and the use of the remittance basis of taxation, which may exclude the capital gain from UK taxation.
You generally will not pay capital gains tax on other UK assets e.g. shares in UK companies, unless you return to the UK within 5 years of leaving.

Some of our specialists who can help

Sophie Chamberlain

Senior Manager

As a Senior Manager, Sophie works across all areas of the business to deliver tax advice to ETC’s broad and varied client base. She has a particul...

Rachel Wagstaff

Assistant Tax Manager

As one of ETC’s Chartered Assistant Tax Managers, Rachel works with the senior management team to provide tax advice to clients on a wide range of topics. Wh...

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