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Share Dealing - Capital Gains Tax ( CGT )


Capital Gains Tax ( CGT ) - Share Dealing

About Capital Gains Tax

Capital Gains Tax ( CGT ) calculations can be very complex because successive governments have made repeated changes to the tax system. You may have to pay CGT on any profits over a certain amount when you sell assets such as shares or a property. The main exemption from this is the sale of your main residence. You are allowed to make gains up to a certain amount each tax year that are exempt from CGT. For 2003/2004 it is £7,900. If your profits come to more than your allowance, you will only have to pay tax on the excess over the tax-free limit.

You may have to pay CGT on any profits over a certain amount when you sell assets such as a property. Any net taxable gain in the year is added to your total income from other sources in the year to determine the tax band applicable. The tax bands are 10%, 20% and 40%, and the levels are almost the same as those shown for income tax:

  • 10% on gains up to £1,920
  • 20% on gains between £1,921 and £29,900
  • 40% on gains over £29,900

The gain is treated as if it were additional income, the difference being that the middle band is 20% and not the 22% applicable to earned income. Anybody who is a higher-rate income-tax payer and also has a taxable gain will pay 40% tax on it. But the taxable gain may often be much less than the actual gain because of various tax reliefs.

Normally an asset is disposed of via a sale, but for CGT purposes your profit could come from a gift or compensation for loss or damage to an asset. But any money you have spent buying, selling or enhancing your asset is not taxable. Husbands and wives are subject to CGT separately, each with their own annual exemption and tax rates and transfers between spouses living together are not liable to CGT, neither is inheritance.


List of Online Share Dealers


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