Your guide on Capital Gains Tax

house-accountantIf you have been wondering all about Capital Gains Tax and how it may affect you, we are here to answer your questions. You might be asking, what is Capital Gains Tax? How do I calculate it? Here is your easy guide to Capital Gains Tax and how it may impact you during this tax year.

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit that you gain if and when you sell or dispose of an asset that has increased in value. For example, if you bought something for £30,000 and then it sells for £35,000, your profit would be £5000. This then means that you will be taxed on the £5000 profit. The question you may be asking is, what counts as disposing of an asset? Here is the answer:

  • Selling the item or asset
  • Giving it away or transferring it to someone else
  • Swapping the item or asset
  • Getting compensation – this could be an insurance pay out

What counts as an asset that I will be taxed on?

Not every asset will count as something that you will have to pay tax on once you dispose of it. The following is a list of the items and possessions that you could have to pay Capital Gains Tax on.

  • Personal possessions (excluding your car) that are worth over £6000
  • Any property that isn’t used as your main home
  • Business assets
  • Shares that aren’t in a PEP or an ISA
  • Your main home if you have let it out, used it for business reasons, or it is very large

When do I not need to pay Capital Gains Tax?

You will not have to pay Capital Gains Tax if all gains in the tax year are under the tax-free allowance. This allowance is £12,300, or £6150 for trusts. If you are in the situation where you have inherited assets, you will have to pay Inheritance Tax rather than Capital Gains Tax. This will remain the case until you later decide to dispose of the assets you inherited, at which point you will have to pay Capital Gains Tax.

How do I calculate Capital Gains Tax?

Calculating your Capital Gains Tax may seem tricky, but this is where these steps will help you. This is the process you should follow:

  • Calculate the gain or profit for each asset or share
  • Add together the gain from all your assets
  • Deduct any allowable losses

When do I report and pay Capital Gains Tax?

The full details of when and how to pay Capital Gains Tax can be found on the government website, but the majority of Capital Gains Tax has to be paid within the same tax year. When you are selling a residential property the tax will have to be paid within 30-60 days, depending on the circumstances.

Should I get help from an accountant?

Getting in contact with an accountant will make the process of calculating and paying your Capital Gains Tax that much easier. An accountant will take the complexities of the calculations out of your hands, ensuring that everything is paid correctly and on time. You can leave the accounting in their expert hands.

Here at Adams Accountancy, we provide accounting services to both individuals and businesses, ensuring that your books are accurate and reliable. Our services can’t be beaten! Get in contact with us on 01322 250 001 or email