CAPITAL GAINS TAX
1. Identify the chargeable disposal
2. Calculate the gain or loss
3. Consider reliefs
4. Aggregate gains and deduct annual exemption
5. Apply correct rate of tax
Identify the chargeable disposal
- Chargeable person
- Makes a chargeable disposal
- What they have disposed is a chargeable asset
- The death of the owner of the asset is not a chargeable disposal – on death
basic tax applicable is inheritance tax.
- Chargeable assets excluded – private motor vehicles, national savings
certificates and recognised currencies.
Calculate the gain or loss
Proceeds of disposal
Less
Incidental costs of disposal
Less
Initial expenditure and Incidental costs (when you initially had the asset)
Less
Subsequent expenditure
=
GAIN OR LOSS
Note – Example
If you did not have initial expenditure – the asset was a gift, you didn’t have to buy it.
The initial expenditure will be the MARKET VALUE AT THE TIME THAT IT WAS
GIVEN.
Consider Reliefs
Purpose of relief – invest in business and alleviate the cash-flow problems that CGT
may otherwise cause.
Non- Business Assets
- Main dwelling house – 100% relief
o Enable people to move house without losing some or all of their money
through taxation.
1. Identify the chargeable disposal
2. Calculate the gain or loss
3. Consider reliefs
4. Aggregate gains and deduct annual exemption
5. Apply correct rate of tax
Identify the chargeable disposal
- Chargeable person
- Makes a chargeable disposal
- What they have disposed is a chargeable asset
- The death of the owner of the asset is not a chargeable disposal – on death
basic tax applicable is inheritance tax.
- Chargeable assets excluded – private motor vehicles, national savings
certificates and recognised currencies.
Calculate the gain or loss
Proceeds of disposal
Less
Incidental costs of disposal
Less
Initial expenditure and Incidental costs (when you initially had the asset)
Less
Subsequent expenditure
=
GAIN OR LOSS
Note – Example
If you did not have initial expenditure – the asset was a gift, you didn’t have to buy it.
The initial expenditure will be the MARKET VALUE AT THE TIME THAT IT WAS
GIVEN.
Consider Reliefs
Purpose of relief – invest in business and alleviate the cash-flow problems that CGT
may otherwise cause.
Non- Business Assets
- Main dwelling house – 100% relief
o Enable people to move house without losing some or all of their money
through taxation.
