Taxes

Question 1

What is Capital Gains Tax?

Answer 1

Tax on the profit when you sell something that has increased in value.

Question 2

What are the conditions for Capital Gains Tax to arise?

Answer 2

There is a chargeable disposal of a chargeable asset by a chargeable person which gives rise to a chargeable gain.

Question 3

What constitutes a chargeable disposal?

Answer 3

• Sale of an asset
• Lifetime gift of an asset
• BUT gift on death is NOT a chargeable disposal.

Question 4

What is a chargeable asset?

Answer 4

Includes valuable personal possessions and certain non-physical assets, such as shares.

Question 5

Who is considered a chargeable person?

Answer 5

An individual who is a UK taxpayer (under residence tax rules) for the relevant tax year.

Question 6

What is a chargeable gain?

Answer 6

Can take into account allowable expenditure (acquisition costs etc) and any losses

Question 7

What types of costs can be considered allowable expenditure for a chargeable gain?

Answer 7

• Costs incurred in acquiring the asset (e.g., conveyancers’ fees)
• Costs that contribute to the value of the asset (e.g., extension but not repair/maintenance)
• Costs incurred in disposing of the asset.

Question 8

What is Private Residence Relief?

Answer 8

A person does not pay CGT if they sell or dispose of their home, provided certain conditions are met.

Question 9

What are the conditions for Private Residence Relief?

Answer 9

• It has been the person’s main home for all the time they lived in it
• They have not let it out (OTHER THAN taking a lodger)
• It has not been used for business purposes (OTHER THAN using a room as a temporary office)
• The ground including all the buildings are less than 5,000 square meters
• It was not bought just to make a gain.

Question 10

What happens if any of the conditions for Private Residence Relief are not met?

Answer 10

Private Residence Relief may be reduced or not available at all.

Question 11

Can married couples and civil partners treat multiple properties as their main home?

Answer 11

No, they can only treat one property as their main home between them.

Question 12

What reliefs are available in SDLT?

Answer 12

If all buyers are first time buyers, there is relief if the price is no more than £625,000

First £425,000 tax free, then taxed at 5%

Question 13

How are second properties taxed under SDLT?

Answer 13

Taxed as normal plus 3% of the total purhcase price

Question 14

What relief is available for first time buyers for LTT?

Answer 14

None.