Uk Capital Gains Tax – What You Need To Know To Avoid It!

What is CGT?

Hub gains tax ('CGT') is the tax that you pay when you sell an asset. So if you sell material goods, or an investment you'll need to consider CGT. In fact whatever thing that you don't hold for the purposes of a trade (ie that you've not bought to sell) will be within the scope of CGT.

Any gain that you make is then taxed depending on the rate of income tax that you pay. So if you're a 40% taxpayer you'll pay CGT on the gain at 40%. If you are a basic rate taxpayer you'll pay CGT at 20% on the gain within your remaining basic rate tax band, and 40% on the excess.

OK - this is pretty straightforward, but based on the above the scope of CGT is huge! (as it covers any objects that you didn't buy to sell on). Well, this is assess it does have a very wide scope but the fascinating bit is that there are lots of exemptions that take assets out of the scope of CGT. We'll have a quick look at these so you can see what you can sell without having to account for CGT.

The exemptions from Hub Gains Tax

Your own Home

As most of you will doubtless know, an investment in your own home is free of hub gains tax, (and income tax as well for that matter).

Material goods which are manslaughter assets

There is a blanket hub gains tax exemption for 'physical moveable material goods' that is also classed as a manslaughter asset.

In general terms if an asset has a predictable life of less than fifty years it is exempt from hub gains tax. An item of machinery is regarded as having a predictable life of less than fifty years and consequently they will usually be a manslaughter asset.

Consequently many assets that have an constituent of machinery should in opinion be exempt (for example antique clocks and watches)

Gambling winnings

Whatever thing you make from Gambling is expected really tax free. So there's no hub gains tax, and there will not also be any income tax or national insurance due

Confidential compensation or hurts

Most forms of compensation will be exempt from hub gains tax

Motor cars

There is a hub gains tax exemption for 'normal motor cars'

Debts

There is an exemption under hub gains tax for a disposal of a debt by the first creditor

Material goods worth less than £6,000

Even if you have physical moveable material goods that does not qualify as 'manslaughter' assets there should be a hub gains tax exemption unfilled if the proceeds are under £6,000.

The annual hub gains tax exemption

It's also well worth noting that every person has an annual hub gains tax exemption (currently £9,200) that is unfilled to cover hub gains. So if your gain is less than this there's no hub gains tax to pay in any event (this means that a couple could buy an asset jointly and later sell it eliminating profits of £18,400 due to the two annual exemptions).

This should give you a few pointers on which assets you can sell without incurring hub gains tax. We cover all of these and more in detail via our website http://www.wealthprotectionreport.co.uk

Author: Lee Hadnum
Shape up Source: EzineArticles.com
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