Capital gains tax 2010

Every year in the UK, individuals must pay Capital Gains Tax on assets they previously held and have now sold, if it has increased in value. In general, Capital Gains Tax is not due when you sell personal belongings worth up to £6000 or, in most cases, your main residential property. Individuals are liable to Capital Gains Tax, not companies. Any sale of assets by a company is seen as profit and is therefore liable to corporation tax.

When do I need to pay Capital Gains Tax

Capital Gains Tax 2009/2010 may be payable on the following gains:
1) If you stop owning, by way of selling, giving away or exchanging any asset or part of that asset
2) Receive any money because of an asset (for example if you receive compensation because of damage to it)

However, the following things may not be liable to Capital Gains Tax 2010

1) the sale of your car
2) the sale of your main home (with some qualifying conditions)
3) cashing in of ISAs or PEPs
4) the sale of personal belongings up to £6000 in value
5) winnings made on gambling, the lottery or the football pools
6) any money which is part of you income on which you have paid income tax

Interesting Points to Note on Capital Gains Tax

There are some interesting points to note when it comes to Capital Gains Tax; if you transfer an asset to your husband, wife, civil partner or a charity you will not have to pay capital gains tax, however, you cannot give assets to your children, or sell them cheaply in order to avoid Capital Gains Tax. If you make a loss on assets, you can offset that loss against other taxes, but only where they would have normally attracted Capital Gains.

In the sad instance of someone dying and leaving you their belongings, there is no capital gains tax due, however, if you choose to sell them at a later date, the tax is due on the difference between the value at the time of death and the value at the time of disposal.

Calculating Capital Gains Tax for 2009/2010

Capital Gains Tax is due for individuals, in each tax year (6th April to 5th April). In 2007/08 and earlier, there were differing rates of Capital Gains Tax dependent upon your circumstances, however, more recently the rate has been standardised for all, and for 2008/2009 and 2009/2010 is 18%.

Example

You purchased shares some years ago for £4,000
You sell them in the tax year 2009/2010 for £18,000
You have made a gain of £14,000 which is liable for Capital Gains Tax

NB The Capital Gains Tax is due only on the profit, not on the total sale value.

Tax Free Allowances

You are allowed to make a certain amount of profit each year, without attracting Capital Gains Tax, which is standard for almost everyone.

For individuals (and trustees for disabled people) the annual exemption rates are:
* 2008 / 2009 = £9,600
* 2009 / 2010 = £10,100

This means that, for 2009/2010, you can make £10,100 of profit from sale of your assets before the 18% tax rate is calculated.
Based on the example above, this would mean that you were liable for Capital Gains Tax on £3,900 (£14,000(profit) minus £10,100 (allowance) = £3,900)

18% x £3,900 = Capital Gains Tax payable of £702.00

NB The £10,100 allowance is taken against ALL of your profit combined.

How to make a Capital Gains Tax return

If you complete a Self Assessment tax return, their will be a Capital Gains Tax page to be completed within the return, however, if you do not complete a Self Assessment tax return, but you want to report gains or losses, you should contact your local tax office. There is a time limit for claiming losses, and gains should be reported by 5th October following the end of the tax year.

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