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Tax Planning For Individuals

Capital Gains Tax

What is Capital Gains Tax?

A capital gain is the profit you make when you sell something that has increased in value. When you sell something for a profit – be it shares, property or even a piece of art – then capital gains tax is payable on the gains that you make.

There are some things that are exempt (such as the house you actually live in). There are capital gains tax reliefs available against certain types of gains too. So getting the right guidance is crucial in making sure you don’t pay more tax that you need to.

Here are some common exemptions and reliefs:

Annual exemption

Each individual has an exemption amount every tax year. So you will only need to pay capital gains tax if your net gains exceed this.

Entrepreneurs’ relief

If you own a business and are looking to sell, you may be entitled to entrepreneurs’ relief. The rate of capital gains tax in this instance is 10%. This is much lower than the standard 18% for basic rate tax payers and 28% for higher rate tax payers. So the right guidance is crucial for entrepreneurs planning to sell a business.

Rollover relief

Traders may be able to claim this relief when selling one business asset and acquiring another business asset.

Gifts holdover relief

The capital gains made when certain assets are gifted to another party can be held-over. This basically means that the tax does not become immediately chargeable.

Private residence relief and other property reliefs

It is generally understood that when an individual sells their home, then capital gains tax is not payable on any gains. But complications can arise when, for example, a property has not been the individual’s home for the whole period of ownership.

Also, if a property has been let, or if an individual owns two homes, this makes the situation more complex. Certain reliefs are available to reduce your capital gains liability. In such instances, careful planning should be carried out before the disposal of any property asset. Using experienced taxation specialists will not only help you navigate the ins and outs of tax obligations – it could save you a lot of money.

Here’s how Kirk Rice reduced the capital gains tax liability on the sale of one clients’ property:

A married couple came to see us as they were selling an investment property in London. The property had been owned for many years and had increased in value significantly. On the face of it, capital gains would have been payable, amounting to a hefty sum.

How did Kirk Rice help?

Our tax specialists got on the case. They dug around and found a few things out that could reduce the capital gains tax liability. Firstly, the property was in the wife’s name. Secondly, the husband had some capital losses that had arisen in a previous year.

Our tax experts identified a way of reducing the capital gains tax liability by offsetting the husband’s tax losses and making use of both of the couples’ tax free allowances. We were able to reduce the capital gains tax liability on the sale by 27% saving the clients around £55,000.

DOWNLOAD OUR FACTSHEETS

 CAPITAL GAINS TAX

 CAPITAL GAINS TAX AND THE FAMILY HOME

 2016-2017 Tax Card

 2017/2018 Tax Card

 2018/2019 Tax Card

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Capital Gains Tax Planning

I would be interested in any tax planning that my wife and I could consider, mainly in relation to Capital Gains Tax, as we have recently sold a Buy to Let property and made a healthy gain which will be taxable.  My wife is a higher rate tax payer and I am a basic rate tax payer.

Click here to read Peter Sharratt’s response