In 2008, the calculation of Capital Gains was simplified as follows:
|Proceeds of Sale less any selling costs||X|
|Cost of asset including purchase plus any enhancement expenditure *||Y|
|Capital Gain||X - Y|
*If the asset was purchased before 31st March 1982 then cost is substituted with the market value on this date plus any enhancement expenditure after this date.
Enhancement expenditure does not include any items of maintenance or finance costs. If you carry out work on a property and then sell it immediately, this may be treated as trading income rather than a capital gain.
It is important to understand that the date of disposal for Capital Gains tax purposes is the date contracts are exchanged (or the date that the contract becomes unconditional). It is not the date when you receive the monies (the completion date) unless the exchange of contracts and completion occur on the same day.
Some reliefs are discussed in other articles. After deducting the reliefs there is an annual exemption which is deducted from the net gains after losses in the year. The annual exemption is £12000 for 2019/20, £11,700 for 2018/19 and £11,300 for 2017/18 for each individual.
Apart from residential properties, tax on gains is then charged at 10% on any surplus basic rate band available for income tax purposes and 20% on the remainder. For residential properties, gains are charged at 18% on any surplus basic rate band for income tax purposes and 28% on the remainder. If there is an entitlement to Entrepreneur’s Relief the gain is taxed at 10%.
If you are not resident in the United Kingdom then there is normally no Capital Gains Tax apart from on the disposal of dwellings after 5th April 2015, disposals of other land and buildings (including companies that hold more than 75% land or buildings) after 5th April 2019 or assets used in a UK trade. You may have a liability if you dispose of an asset and you were to return to the UK within five years of leaving.
© Thandi Nicholls Ltd 2018 All Rights Reserved - The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, K Nicholls FCA or S Thandi cannot be held responsible for the consequences of any action or the consequences of deciding not to act.
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