What is Capital Gains tax?
CGT is a tax paid by self-employed traders and those in business partnerships. it is also paid by individuals who have sold particular assets for more than £6000 such as:
- Second Properties, properties that have been inherited and valuable personal possessions such as jewellery and antiques.
- Shares that are not in an ISA or PEP
- Business assets like land and buildings, trademarks and fixtures and fittings.
Capital gains tax is a federal fee you pay on the profit made from selling certain types of assets. These include stock investments or real estate property. A capital gain is calculated as the total sale price minus the original cost of an asset.
Even if you plan on selling any assets in the near future, there will be a time when you will decide to sell a property or investment. Understanding what capital gains are and when.
How much can you gain before paying CGT?
The annual exempt` for the 2021-22 tax year is £12,300 for individuals. This means that any gains realised within that amount incur no tax. This exemption cannot be carried forward into the next tax year, so it is often advisable to use your CGT exemption each year in order to reduce the risk of incurring a significant CGT bill in the future.