Capital Gains Tax (CGT) is often forgotten in the press when they are being critical of the tax system, with more focus given to inheritance tax (IHT), especially around election years. However, CGT actually generates more revenue than IHT for the government. So, what is CGT, and why is it important to understand its implications?
CGT is a tax on the profit made when you sell certain assets, including personal possessions and cryptocurrency. The tax is calculated by deducting the original purchase price and costs of sale from the sale price, then reducing the figure by the tax-free allowance and applying the applicable tax rate.
Recent changes have seen the tax-free allowance reduced, with further cuts planned, meaning more individuals will be subject to CGT.
There are, however, reliefs available to reduce, postpone or remove CGT liabilities, including Principle Residence Relief, Business Asset Disposal Relief, and Business Asset Rollover Relief.
It is advisable to seek professional advice when considering the sale of an asset, planning for retirement, or exploring succession planning options.
By understanding CGT and its implications, individuals and business owners can effectively manage their finances and plan for tax liabilities.
