Capital Gains Tax – Guide to Savings
Capital Gains Tax, often referred to as CGT is tax on the profit of an asset that has increased in value. For example, if you were to buy a statue for £2500 but were able to sell it on for £10000, then £7500 would be classed as CGT. ( £10,000 – £2500 = £7500 ).
You pay CGT on various items, such as business and personal possessions. This does not include your car or home, unless you let it out or used it for business purposes. You do not need to pay capital gains allowance if your total gains are under the tax free allowance. Capital Gains Tax Allowances currently stand at are £5550 for trusts or £11,100 per annum. You also do not need to pay capital gains allowance on gains from betting, ISAs, lottery and premium bonds. CGT is exempt on assets you give to your spouse, unless you separated in that year or you gave them to sell on for business purposes. You are not required to pay capital gains tax on an asset if you have given it to charity without gain.
As an individual The Accountancy Solutions, qualified accountants in Birmingham can help you with your capital gains tax returns. You may be able to save vast amounts simply by hiring an expert. Property that is being let out or used for business purposes is taxable under CGT rules; accountants for landlords can provide help for property.
As a business owner, it is worth getting expert help from accountants for SME. Many small to mid size businesses save thousands in tax savings by hiring a specialist accountant to deal with tax returns.
There are many ways to legally save on capital gains tax. Every year an individual has a capital gains tax allowance of £11,100. This means you could legally transfer asset to a spouse to make use of the CGT allowance.
Paintings and antiques can prove to become a tax efficient investment. Each painting or antique item benefits from a £6,000 exemption. This means if you sold individual items instead of a set, each item could qualify from the tax exemption. This is a great tip if you collect expensive art or antiques. The Accountancy Solutions specialise in Owner Managed Business may be able to provide advice regarding other tax reliefs.
If you have a partner and you are not married, you could simply both nominate a different home as your main living home to benefit from a tax relief on both properties. If you are married however, you would only be allowed the choice of nominating one home.
By law, you would have to pay capital gains tax on any property that you let out. This however does not mean you are exempt from tax relief as there are ways to dramatically reduce your capital gains tax bill. If you were living in a property listed as your main home before you let it out, you could benefit from a capital gains tax reduction.
If you who shares through a save as you earn scheme, you could potentially transfer them to an ISA or pension within 90 days to ensure that they are tax free when you sell them.
Did you know that you can defer tax on gains by reinvesting them? You could do this under EIS, which is the Enterprise Investment Scheme. This allows you to invest up to £200,000, which can save a lot of money. We suggest speaking to an expert accountant for more information and a deeper understanding on enterprise investment schemes.
Currently there are two rates of capital gains tax. There is basic rate, in which taxpayers are required to pay 18% and there is also a higher rate if your gain puts you over the tax threshold. This new rule was put in place on the 23rd of June, 2010. Before this, there was only a single rate of 18% on taxable gains.
As an individual, an ISA or a pension is a good way to save on capital gains tax. You could make a lump sum into your pension and save up to £4000 on your capital gains tax bill. By simply contributing to your pension, you could save thousands in tax relief. This legal trick is common knowledge to The Accountancy Solutions.
These simple tips can help save you money by drastically reducing your tax bill. We suggest you get in touch with an accountant to discuss how you can save yourself thousands with expert help.