Capital Gains Tax: Everything You Need to Know
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit you make when you sell a non-primary residence or other property that's increased in value. It's the gain you make that's taxed, not the total amount of money you receive from the sale.
Rates for Capital Gains Tax
The CGT rate you pay depends on your total taxable income. The current rates for 2023-24 are:
- Basic rate taxpayers: 10%
- Higher rate taxpayers: 20%
Capital Gains Tax Allowance
The capital gains tax allowance is the amount of profit you can make from an asset in a tax year before any tax is due. For 2023-24, the allowance is £12,300.
How is Capital Gains Tax Calculated?
To calculate your capital gains tax, you need to know:
- The selling price of the asset
- The cost of acquiring the asset
- Any expenses incurred in selling the asset
Once you have this information, you can use the following formula to calculate your capital gain:
Capital Gain = (Selling Price - Acquisition Cost) - Expenses
You will then need to pay CGT on the amount of your capital gain that exceeds your personal allowance.
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