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TAX TIP TUESDAY: CGT 5 bullet update

Our five minute read, Tax Tips for UK doctors and dentists will help you save tax, get you organised with your tax affairs and make you feel at ease that everything is taken care of.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

(1) Capital Gains Tax

Capital Gains Tax is the tax you pay on the profit you make when you dispose (sell) of something (asset) that has increased in value. It’s important to note, that it is the profit that is taxed and not the amount of money you receive.

For example, if you buy a piece of jewellery for £7,000, and sell it sometime later for £15,000, you will pay Capital Gains Tax on the profit of £8,000.

(2) Disposing of an asset

The term ‘disposing’ covers several things. In terms of Capital Gains Tax, it can mean:

  • selling it
  • giving it away as a gift or transferring it to someone else
  • swapping it for something else
  • getting compensation for it i.e. like getting an insurance pay-out if it has been lost or destroyed

(3) What Capital Gains Tax is paid on

Capital Gains Tax is due on the disposal of:

  • most personal possessions worth more than £6000 (excluding your car)
  • property that isn’t your main home
  • your main home if you rent it out, used it for a business or if it is very large
  • shares that aren’t held in an ISA or PEP
  • business assets

(4) Capital Gains Tax allowances

You pay Capital Gains Tax on your overall gains above your tax free allowance. The tax free allowance is £11,300 and £5,650 for trusts.

You don’t have to Capital Gains Tax if your total taxable gain is below your allowance.

(5) Capital Gains Tax rates

If you sell your residential property, you will pay a different rate of tax on the gains then you do on the disposal of other assets.

As a higher rate or additional rate taxpayer, you will pay 28% on your gains from the disposal of your residential property and 20% on your gains from the disposal of other assets.

If you are a basic rate taxpayer, the rate you pay will depend on the size of the gain, your taxable income and whether the gain has been made from the disposal of your residential property.

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