Capital Gains Tax: What You Need to Know

How it Works

Capital gains tax (CGT) is a tax on the profit you make when you sell an asset, such as a property or shares. The amount of tax you pay depends on your income tax bracket and the type of asset you're selling.

Residential Property

If you sell a residential property, you'll pay 18% CGT if you're a basic-rate taxpayer or 28% if you're a higher-rate taxpayer. However, you can claim a principal private residence (PPR) exemption for one property that you live in. This means you won't pay any CGT on the gain you make from selling your PPR.

Other Assets

If you sell other assets, such as shares or investments, you'll pay 10% CGT if you're a basic-rate taxpayer or 20% if you're a higher-rate taxpayer. However, there are a number of exemptions and reliefs that you may be able to claim, such as the annual CGT allowance and the entrepreneurs' relief.

Conclusion

Capital gains tax is a complex area of law, so it's important to get professional advice if you're planning to sell an asset. By understanding how CGT works, you can make sure you're paying the right amount of tax and avoid any unnecessary penalties.