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Today, we will delve into a critical topic for businesses and entrepreneurs in the United Kingdom: Capital Gains Tax (CGT).
What is Capital Gains Tax?
CGT is a tax applied to profits gained from the sale of assets, such as properties, shares, and investments in general. It's important to note that CGT applies only to the realised gains, not the total transaction value.
When Does CGT Apply?
CGT applies when your company sells (or dispose) an asset for a gain . For example, if you bought a painting for £5,000 and sold it later for £25,000, you’ve made a gain of £20,000 (£25,000 minus £5,000).
There is an annual exemption of £12,300 (2022/23), and £6,000 (2023/24) which means gains up to this amount are not taxable.
CGT Rates
CGT rates vary depending on your company's income bracket:
10% and 20% tax rates for individuals (not including residential property and carried interest)
18% and 28% tax rates for individuals for residential property and carried interest
20% for trustees or for personal representatives of someone who has died (not including residential property)
28% for trustees or for personal representatives of someone who has died for disposals of residential property
10% for gains qualifying for Business Asset Disposal Relief — previously known as Entrepreneurs Relief
28% for Capital Gains Tax on property where the Annual Tax on Enveloped Dwellings is paid, annual exempt amount is not applicable
20% for companies (non-resident Capital Gains Tax on the disposal of a UK residential property)
Efficient Tax Planning
We employ legal strategies to optimise your CGT liability. This includes the use of rollover reliefs, where gains are reinvested in similar assets, deferring the taxation.
Reporting Capital Gains
It's crucial to keep detailed records of all asset transactions and accurately calculate capital gains for precise reporting to HM Revenue and Customs (HMRC).
Rely on Us to Manage Your CGT
Capital Gains Tax may be intricate, but with the right guidance, we can assist you in efficiently managing this tax obligation in your business ventures. If you need specific guidance for your situation, we recommend consulting an experienced accounting professional from iAcciunting Services.
We are here to help maximise your investments while managing your tax obligations.
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