Question archive: capital gains
Are gains from 'Forex Trading' Capital Gains/Income Tax free?
No, unless you are spread betting - e.g. IG Index.
Can I offset losses made in the previous tax years against this year's Capital Gains?
Yes, unused losses on previous capital disposals are carried forward to offset against future capital gains.
The split would normally be in the same ratio as the ownership of the shares.
The basic capital gains tax computation is to take your disposal proceeds and from this you can deduct the original cost of the shares, any commission on the original purchase and subsequent disposal of the shares. The cost can be indexed from the month you purchased them in 1990 to April 1998, using the RPI (Retail Prices Index) tables.
From the ‘gain’ you can deduct your annual capital gains tax exemption. Any gain over this amount will be taxable on you.
The Inland Revenue have a leaflet entitled An Introduction to Capital Gains Tax, which may be of use to you.
I am thinking of selling my house. Do I need to worry about capital gains tax?
Normally, the disposal of your main residence is covered by the private residence relief and is therefore not taxable. If however your property is not your main residence or if it has been let out, all or part of the gain may be taxable. If you are in doubt you should read leaflet IR283 Private Residence Relief from the Inland Revenue.
If the garden and grounds currently total less than half a hectare (about an acre and a quarter) there should be no problem in selling off a part and retaining the house as a residence. BUT if the garden and grounds are bigger than this, there may be tax to pay, regardless of the size of the part that is sold off.
The Revenue will usually argue that if you sell off part of a big (over 0.5 Ha) garden, main residence exemption will not be due on that sale, on the premise that a large garden is protected only if it is required for the "reasonable enjoyment" of the house. And if you've sold part of it off, it couldn't have been so required!
If you are not married you cannot gift a proportion of the shares to your partner without incurring a capital gains tax liability on the transfer.
You are entitled to an annual exemption. If you have any unused capital losses from previous disposals you can set these against your capital gains.
If you were prepared to take the risk you could dispose of enough shares to utilise your annual exemption this year and dispose of the rest after 5th April. You would then have next years annual exemption to set against your gains.
The longer you keep your shares the more taper relief you will be entitled to.
You could move in to the flat and create a Principal Private Residence, but it has to be for real. The length of time is a lot less important than the quality of occupation. Change address, phone listings, contact addresses at work / with friends, new address for utilities, council tax bills, doctor, dentist. You know - all the badges that go with a genuine house move.
Don't forget your present house though. Could that still be a residence? If so, then you have to chose a PPR and notify the Inland Revenue which one it is.
Never do anything purely led by tax reasons. Sell at the best time for the best price. You might pay some tax, but treat it as an expense and see if you still come out with a better profit.
If the rented property has ever been your main residence, then it would qualify for Lettings relief and at least 3 years of exemption (based on time apportionment).
Otherwise it could qualify for taper relief and indexation, depending on length of ownership. Transferring a % to your wife, after marriage and prior to sale, could access her CGT exemption and (possibly) lower tax bands.
Yes, unless you were trading in them, then it would be income tax or Corporation Tax.
You may be able to deduct expenses against the Capital gains on the realisation of your asset. For example if you advertised your domain name, or had to have upkeep of it.
Is Capital Gains ever due on profits made from the sale of your sole residence?
Not if it's your sole and main residence.
If you let it for part of the period of ownership, then there can be a potential Capital Gains Tax charge, but it would only be a proportion worked out as
(Total Gain) x (time let) / (time owned) = chargeable
And even then there are extra exemptions which can minimise any Capital Gains Tax charge.
The other possibility for CGT on your sole or main residence is if you are/were running a business from it and that business forms a substantial part of the residence.
Generally, commercial woodlands (area unimportant) were removed from tax in April 1998.
Capital Gains tax would still be due on the sale of any woodland, but would only be calculated on the land. The part of the sale price directly related to the trees would be excluded.
The maximum lettings relief that can be claimed is £40,000 each, if the property is in joint names. However, the property that has been let must be part of your dwelling house. £40,000 is the maximum amount that each of you could claim. If the relief for ‘owner occupation’ is lower, this figure is used instead. This can be a complicated issue and you may wish to seek independent taxation advice on this.
As a straight gift to your son the transfer will be a PET as you describe. However, CGT may be due based on the excess of market value over cost (but take into account indexation and taper relief if appropriate). You may consider a transfer into trust in order to hold over the capital gain. All in all it is not possible to give a definitive reply as further info is needed and there are many possible alternatives depending on your own and your son's tax position.
No - provided it takes less than 36 months to sell it. It was your personal property and main residence and that is exempt from Capital Gains Tax. It would only be taxable if you started letting it out in the interim as an Asset. Any CGT liability would be based on time apportionment.
What, in layman's terms, is taper relief?
Inflation: The Retail Prices Index. £1 buying more a few years ago than it would do today.
That was the basis of the Indexation Allowance when doing a Capital Gains Tax (CGT) sum.
Gain = Sale proceeds - (cost + addition)
The addition reduced the gain by inflating the cost when first buying it years ago by the Retail Prices Index - ie £1 then = say £1.50 now.
This method of inflating the cost price stopped in April 1998 and was replaced with taper relief.
(However Ltd companies continue to get indexation still.)
Work out the gain, calculating indexation first if neccessary, and then reduce the gain you'll pay CGT on by a percentage based on how long you've owned it since April 1998.
There are different rates depending on whether the item you are selling was an asset used for business or not.
For the sale of business assets, the percentage reductions start sooner, and are given at generous rates.
For non-business assets the reduction doesn't even start until you've owned the asset for three years, and even then they're not as generous.
As a small bonus, if you bought the non-business asset before the indexation allowance was discontinued, you get an extra year. That is, say you've owned something for 2 years - normally there would be no taper relief claimable, but because it was bought a while ago, (before 17 March 1998) you are allowed to take the taper relief that corresponds to 3 years ownership, and reduce the Taxable Gain.
This page was last reviewed on 07 April 2005. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
