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Residential Conveyancing matter.
With a new coalition Government, we are entering a period of uncertainty. What is clearly coming out of Westminster, however, is that significant changes will be made to Capital Gains Tax.
What Is Capital Gains Tax?
Capital Gains Tax (or “CGT” as it is often called), is a mandatory tax payable when a person disposes of property or assets, other than cash. It is payable whether those assets are sold or given away for free.
How Is Capital Gains Tax Calculated?
As with most areas of tax, the calculations can be complicated as there are a number of specific allowances and exemptions, the main exemption being that the sale of a person’s home is exempt from Capital Gains Tax.
In simple terms, Capital Gains Tax is payable on the increase in value between the value at which the property or asset was acquired and its value when it is sold or given away.
What Is The Rate of Capital Gains Tax?
Currently, Capital Gains Tax is paid at the rate of 18%
How Can I Reduce The Amount Of Capital Gains Tax Payable?
Expert opinion suggests that if you are seeking to sell or dispose of assets, particularly second properties or rental properties, do so NOW. The reason for this is that it is widely expected that a forthcoming Budget will include a significant increase in the rate at which Capital Gains Tax is paid. Although no one knows yet what that increase will be, the rate could be increased up to as high as 50%.
How Would This Work?
As a simple example (not including the potential allowances, exemptions and reliefs available), imagine you had bought a buy-to-let property, say 10 years ago, for £100,000 and you were now looking to sell it for £200,000.
Capital Gains Tax is payable on the difference in value between the value at the time of acquisition (£100,000) and the value at the time of sale (£200,000).
Capital Gains Tax is therefore payable at 18% on £100,000, amounting to £18,000.
Now imagine that Capital Gains Tax has been increased to, say, 40% as appears highly possible. If the same circumstances were applied, Capital Gains Tax could be as high as £40,000.
ALWAYS REMEMBER, CAPITAL GAINS TAX ASSESSES THE MARKET VALUE NOT THE SALE PRICE SO IT CAN NOT BE AVOIDED BY GIVING ASSETS AWAY.
If you’re thinking of selling or giving away property or assets, ensure that it is done sooner rather than later.
Bell & Buxton can help by providing a swift, effective service to assist in the transfer of rental and holiday homes.
For more information, contact Matthew Rodgers on 0114 249 5969 or by e-mail at email@example.com
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