Capital Gains Tax: What is It and How Can it Be Reduced?

CGT is applicable when you sell assets or shares for a higher price compared when it was first acquired.

14:15 04 April 2013

If you’re thinking about selling assets for a higher price compared when you first bought them, keep in mind that you’re more likely to pay Capital Gains Tax or CGT. Chargeable assets include all forms of properties, which include land and building, business assets, shares, and goodwill. 

Rate of CGT is 28per cent of the taxable gains and income, which is above the income tax basic rate band. Below that limit, the CGT rate is 18per cent. For trustees and personal representatives of deceased persons, the rate is 28per cent on all gains. 

 

How to reduce it? 

 

The following can reduce the amount of chargeable gain: 

 

• Incidental costs of acquisition/disposal

• Expenditure to enhance the value of the asset

• Tax relief and allowances

 

Tax Reliefs

 

There are several tax reliefs that can help you reduce the chargeable gain thus reducing the CGT. These include the following: 

 

• Rollover/holdover relief on replacement of business assets

• Business incorporation relief

 

Truth be told, Capital Gains Tax is a complicated topic. If you’re selling assets and if you’re not very familiar with CTG, it’s recommended to consult with an expert to get the guidance you need.