Capital Gains Tax Individuals

Question 1

What is the relevant year for CGT?

Answer 1

April 6 - April 5th (the tax year not financial)

Question 2

What 4 things happen to give rise to a CGT charge?

Answer 2

Chargeable disposal of
Chargeable asset by
Chargeable person which
Gives rise to a chargeable gain

Question 3

When is CGT tax due?

Answer 3

On or before the 31 January of the following tax year when the disposal occured

Question 4

What are the 2 most common instances of a chargeable disposal?

Answer 4

Sale of an asset

Lifetime gift of an asset

Question 5

Is CGT charged on death?

Answer 5

No

Question 6

What is a chargeable asset?

Answer 6

Everything except for:

Principal private residence

Motor cars for private use (incl. vintage)

Certain investments

UK sterling

Question 7

What are examples of the most common investments that are not considered chargeable assets?

Answer 7

Government securities

National Savings Certificates

Shares and securities held in individual savings accounts like ISA’s

Life assurance policies

Question 8

What does it been there must be a chargeable gain?

Answer 8

You must sell the asset for more money than you paid for it

Question 9

Does a gift to a spouse incur CGT?

Answer 9

No

Question 10

What happens if you make a disposal to a connected person?

Answer 10

HMRC will calculate the market value, and you will be CGT taxed on that market value regardless of what the connected person paid for it

Question 11

Who are connected persons for CGT purposes?

Answer 11

Direct lineal ancestors, not lateral ancestors

Companies under common control

Partners in business

Question 12

How do you calculate the chargeable gain?

Answer 12

Money made - money paid = gain

Question 13

What 3 categories of expenditure can be deducted from the chargeable gain?

Answer 13

Disposal (e.g,. agent commission)

Initial (e.g., survey)

Subsequent (to enhance value, preserve asset etc)

Question 14

How can you use capital losses to your tax advantage?

Answer 14

You can offset gains from losses

Question 15

How far forward can capital loss allowances be carried?

Answer 15

They never expire, but you have to use them at the first available opportunity/gain

Question 16

What is the annual exemption amount for ‘24?

Answer 16

3K

Question 17

Who is entitled to the AE?

Answer 17

All individuals

No companies

Question 18

When do you apply AE in your calculation?

Answer 18

After deductions and capital loss allowances

Question 19

Do companies pay CGT?

Answer 19

Technically they pay ‘corporation tax on chargeable gains’

Question 20

Are charities exempt from CGT?

Answer 20

Yes

Question 21

What are the CGT rates for individuals?

Answer 21

Basic rate: 10%

Higher and additional rate: 20%

Question 22

Explain how CGT tax rates for individuals are apportioned between the income bands

Answer 22

When taxable income + total taxable CGT after deductions = less than 37,700 CGT rate is 10%

When taxable income exceeds basic rate CGT rate will be 20%

When taxable income is less than 37,700, but combined with taxable gains is above 37,700 then the part of the gains above 37,700 will be charged at 20%

Question 23

How do you calculate the taxable chargeable gain?

Answer 23

Sale proceeds - disposal expenditure - initial expenditure - subsequent expenditure - carry forward losses - annual exemption

Question 24

How do you calculate net sale proceeds?

Answer 24

Sale proceeds - disposal expenditure

Question 25

How do you calculate total chargeable gain?

Answer 25

Net sale proceeds - initial spending - subsequent spending