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About Capital Gains

Last modified 07:54, 24 Apr 2017

About Capital Gains

Overview

Capital Gains Tax (CGT) is a tax on profit, which is paid by individual taxpayers when they dispose of assets or investments. The types of assets or investments can be anything from holiday homes to works of art or shares. A capital gain may occur when the taxpayer sells, transfers, or gives these assets to someone else for more than the purchase price.

Chargeable assets

All assets are regarded as chargeable unless they are specifically exempted from CGT.

Note 

The date that a chargeable disposal is deemed to occur is the date that ownership of the asset changes hands, which supersedes any payment date.

Non-chargeable disposals

Any gains or losses arising from the following are exempt from CGT:

  • gifts to charities, art galleries, museums, etc.

  • disposals caused by the death of the taxpayer

Use the Capital Gains section to add details relating to disposals and losses.

Note

The dispose term is used to refer to an asset that you no longer own. For example, you may have sold it or given it away as a gift. 

Add Capital Gains

For tax years prior to 2013: 

  1. Open the Capital Gains section.

  1. Click the  hyperlink above the Description column. The new disposal wizard appears. 

  2. Select disposal type.
    What is the nature of the chargeable event?

  • Disposal of securities
  • Disposal of land and property
  • Disposal of any other asset
  • An attributed gain
  1. Follow the specific onscreen instructions for each disposal type. Depending on the disposal type, three to four tabs appear when you click the Finish button.

  1. Use these tabs to add further details about the capital gain.

  2. Click Save and Close when complete.

For tax years 2013 onwards: 

  1. Open the Capital Gains section.

  1. Select the disposal type.
  • Q - Listed
  • U - Unlisted
  • L - Land and property
  • O - Other assets
  1. For simple transactions enter the Description, Disposal date, Gain, Loss, etc. as required.
  2. For more complex transactions select click the  button.

  1. Fill in the full details as needed. Click the  button to go back to the Capital Gains tab.
  2. Click Save and Close when complete.

Edit Capital Gains

  1. Open the Capital Gains section. A list of created Capital Gains appears.

  2. Select the name of the capital gain under Description to open.

  3. Make any changes and then click Save and Close.

Add Enhancement Expenditure

The term Enhancement Expenditure refers to expenses incurred when improving or upgrading an asset. For example, adding an extension to a house.

To Add Enhancement Expenditure

  1. Open the Capital Gains section.

  2. Click the Transaction tab.

  1. Click the  hyperlink.

  2. Complete the fields in the Enhancement Expenditure / acquisition costs: description window.

  • Date - Enter the date the expense occurred.

  • Description - Describe the expense, e.g. home extension.
  • Cost - Enter the amount paid.
  • Comment - Type in any comments.
  1. Click Save and Close.

Note 

Indexation is an allowance to ensure that the taxpayer is only taxed on capital gains made after adjusting for the rate of inflation. The indexation allowance has been frozen since 5 April 1998 and replaced by taper relief.

Taper relief provides a reduction in the capital gains tax payable on the disposal of assets for individuals, partnerships, estates and trusts. However, taper relief does not apply to entities liable to corporation tax, such as companies. The relief works by reducing the proportion of the capital gain charged to tax by reference to the length of time the asset has been owned.

 

 

Add Incidental Costs

Use the Incidental Costs hyperlink to add expenses associated with the disposal of an asset or investment.

To Add Incidental Costs

  1. Open the Capital Gains section.

  2. Click the Transaction tab.

  3. Click the  hyperlink.

  4. Complete the fields in the Incidental costs of disposal: description window.

  • Date - Enter the date the expense occurred.
  • Description - Describe the expense, e.g. home extension.
  • Cost  - Enter the amount paid.
  • Comment - Type in any comments.
  1. Click Back to return to the Transaction tab.

  2. Click Save and Close.

Related

About Losses
The Losses module allows you to allocate losses in one location. The top section of Losses contains information relating to income and liabilities, while the bottom section contains details relating to income, gains, and losses. You can only enter figures in the white cells, while the grey cells display read only information.  When you enter an amount in the editable fields, this automatically updates any related values, such as the Balance loss c/fwd (carried forward) and the amounts that appear under Summary.
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