Capital Gains Tax in United Kingdom

Definition of Capital Gains Tax

In accordance with the work A Dictionary of Law, this is a description of Capital Gains Tax : A tax charged on gains arising from the disposal of assets. The tax due is a proportion of the chargeable gain, which in general terms is the amount by which the proceeds of the disposal exceed the original cost of acquiring the asset. If the disposal results in a loss, this may be offset against other chargeable gains in the same year or subsequent years. Assets that may be taxed in this way include stocks, shares, unit trusts, land, buildings, machinery, jewellery, and works of art. There are, however, a number of exemptions, including private motor vehicles, an individual’s *main residence, National Savings Certificates, and most personal chattels with an expected life of less than 50 years. Marketable government securities held for longer than 12 months are also exempt. Gains arising from the disposal of business assets may be offset against the cost of acquiring replacement assets. This is known as roll-over relief. Capital gains tax applies only to gains accruing since 31 March 1982. If the asset was held before this date, the gain is based on the asset’s market value on 31 March 1982. The gain will be reduced by taper relief if the asset was held for more than one year. For example, a business asset owned for three years will have the gain reduced by 50%. The first £7500 (for 2001-02) of annual gains is exempt. The rate of tax is the taxpayer’s marginal rate of income tax (10-40% in 2001-02).

Capital Gains Tax History

A tax on capital ‘gains’. When you sell or give away an asset (such as property or shares of stock) that has increased in value, you may be taxable on the profit or ‘gain’.

Capital gains tax in the Context of Mortgages

A tax placed on the profits from the sale of real estate or investments.

Similar Terms

Capital

Capital

In the context of mortgages, capital describes the original sum borrowed as distinct from interest required on that loan. A repayment mortgage involves repayment of a little of the capital interest each month.

Capital appreciation or depreciation

Capital appreciation or depreciation

The increase or decrease in the value of the individual’s investment in the property.

Capital expenditure

Capital expenditure

The cost of making improvements on a property.

Resources

See Also

Capital gains

Capital growth