CAPITAL GAINS TAX

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CAPITAL GAINS TAX

Capital Gains Tax is the most misunderstood of all the taxes. You only have to worry about it when you sell of or dispose of certain kinds of items. Disposing of an asset also includes selling the item below market value or actually giving it away for free. What happens in this situation is that you have to treat the item as if you sold it for the market rate.

For example:

You bought a second home in 2005 for £150,000. You rented it out up until recently in December 2014 where you decided you give it to your daughter for free for her to live in. The market value of the house in December 2014 was
£250,000.

Even though you didn’t actually receive any money for the property it has to be treated as if you had. In the situation above you would have a gain of £100,000 on which you would be taxed under Capital Gains. 

If you had received £200,000 from your daughter we would still have to treat it as if you had received the market value of £250,000.

Do I need to complete a Capital Gains Assessment?

If you answer yes to any of the following you may need to undergo a Capital Gains Analysis:

Please get in touch if you are unsure whether you need a capital gains tax assessment.

SHARES

If you owned any shares in a company and then sold them or disposed of them a Capital Gains assessment must be made. This is valid even if you received the same or less money than you originally paid for the shares.

PROPERTY

This is when you sell or dispose of a property that at any point during your ownership was not your main family residence. If you declared another property as your main residence even for a short while or rented it out at any point then a Capital Gains assessment must be made regardless of whether any tax may be due. There are exemptions for if you left the country for work or had to move elsewhere for work, didn’t rent the property out and moved back in afterwards before you sold it.

POSSESSIONS

This is a relatively unknown part of Capital Gains tax and becomes valid when you sell items such as stamp & book collections, antiques, paintings & jewellery. If you bought and sold the items for under £6,000 then it is exempt from Capital Gains. If the item was reasonably expected to have a useful life of less than 50 years when you first bought it then it will be exempt from Capital Gains. If the item was used in a business then it will be dealt
with as Capital allowances for the business.