When you sell an asset for profit (such as a property, certain types of investments and shares) Capital Gains Tax (CGT) is payable.
Depending on the asset in question, there are different methods available to mitigate or reduce the Capital Gains Tax. This will also depend on whether you are looking to take an income from the asset in question, or simply wish to sell for a profit in the future.
The key to CGT planning is to make use of your annual exemptions, if possible, whilst also shielding the investments in question using the relevant tax wrappers, such as SIPP’s for commercial property and tax-efficient vehicles for investment portfolios.
For Higher and Additional Rate Taxpayers, we would also consider using various investment schemes (with varying risk profiles) to defer or relieve the CGT in question. For example, Venture Capital Trusts (VCT) and Enterprise Investment Schemes (EIS) can be useful in this regard.
If you have an investment portfolio, this too, can be managed and structured in such a way as to mitigate CGT.
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Everyone has an annual CGT exemption. Individuals in 2014/15 can make capital gains of £11,000 before any CGT is payable. Trusts only benefit from half the exemption.
CGT is payable at flat rates of 18% or 28%, depending on your tax status. Trusts pay CGT at the higher rate only, regardless on level of the gain in excess of the exemption.
If you are selling shares in your business, you may qualify for Entrepreneurs’’ Relief, which benefits from a reduced rate of 10%.
Bankfield’s Independent Financial Advisers specialise in CGT planning and have up to date qualifications to ensure that you receive the very best professional advice we can provide.
Tax treatment is based on individual circumstances and may be subject to change in the future. Taxation planning is not regulated by the Financial Conduct Authority.
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long term investment, the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Some funds will carry greater risks in return for higher potential rewards. Investment in smaller funds can involve greater risk than is customarily associated with funds investing in larger, more established companies. Above average price movements can be expected and the value of these funds may change suddenly.