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Capital Gains Tax
This is, to put it simply, a tax on capital gains.
Capital gains tax (CGT) is levied at 18% and 28% (18% up to the limit of the basic rate income tax band, 28% above it).
Everyone has an exemption of £10,900 for 2013/14. (Used wisely this exemption can ensure that you need never pay capital gains tax when you come to turn your capital savings into supplementary income. See "turning assets into income and avoiding CGT").
Pre March 1982 assets
These are to be valued at their 31 March 1982 value.
Post March 1982 assets
Valued at cost.
When you sell qualifying assets (i.e. a business) your first £10,000,000 of gains are taxed at a rate of 10%.
This is a lifetime limit and, for those who build and sell businesses on a serial basis, you can eat away at it with each business sale until you have reached your limit.
Broadly speaking if you sell (or give away) something that is considered to be an investment, and make a profit on it, you should assume that CGT may be relevant and seek advice.
Exempt assets are free from CGT and the exemption applicable to most people is the exemption for your main home. The sale of your home (so long as you only have one) does not incur a CGT liability in most circumstances. If you have more than one house, we can advise you as to the best way to proceed.
Definition of disposal
There is no formal definition of disposal but, for everyday use, the two main events that are classed as disposals are the sale of an asset or the gift of an asset.
Gifts between spouses (living together) are not chargeable at the time of transfer, nor are gifts to certain charities. Most other gifts are, and it is important to take advice before making any significant gifts. For example passing a valuable painting to your child may result in a tax bill arising even though no money has changed hands.