Capital Gains Tax (CGT) Calculator - work out whether you have incurred a capital gain.
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This calculator works out if you have incurred a capital gain, and the amount of the CGT liability.
Capital gains are chargeable gains that accrue to a person on the disposal of assets. Every gain is a chargeable gain unless there is express provision to the contrary. The scheme of the legislation is to exclude gains from this broad definition by means of a series of exemptions that variously exclude certain types of gains, assets, disposals and persons. There are also provisions to exclude from the computation of chargeable gains any element that is chargeable to tax as income.
Thus, for a gain or loss to be within the charge to capital gains tax, there must be the following three elements:
- a person to whom the gain or loss accrues;
- an asset; and
- a disposal of the asset.
CGT is charged on net gains, i.e. total chargeable gains realised during a tax year after deducting total allowable losses realised in the year.
Companies are subject to corporation tax on chargeable gains calculated according to modified CGT rules.
Capital Gains on Residential Property
CGT is now applied to some gains made on residential property, at higher rates of 18% or 28% of the gain (remember, the gain is different to the total sale price, and expenses and costs can be offset against the gain).
If you are selling your main residential property (i.e. the home that you usually reside in and consider to be your primary residence), CGT does not usually apply. However, gains made on second homes and buy-to-let properties could incur a CGT charge.
If a second property is one that you have recently inherited, and you plan to sell it, any gain will be calculated from the date that you acquired the property. Unless you have made other gains in the same tax year, it is unlikely that any CGT charge will occur. If you have other gains, you may want to consider the timing of realising the gains, and spreading them across multiple years.
It is useful to be aware of the spouse's allowance. You can double the CGT annual allowance by sharing ownership with your spouse.
Disposal of assets
CGT can only arise on the disposal of an asset. Normally this means sale, but it could also mean gift or compensation for loss or damage to an asset.
- The value on which the gain (or loss) is based is normally the consideration received. However, on gifts and certain sales, the open market value is used instead.
- No CGT is payable on death. The beneficiaries of a deceased person's estate are treated as if they had acquired the assets of the deceased at their market value on death.
Deductions
Certain costs are allowable in computing chargeable gains:
- Costs of acquiring and disposing of the asset. This could include:
- Stamp Duty
- Dealing Costs
- Adveritising Costs
- Professional Fees
- Expenditure on enhancing the asset's value.
Losses
Losses brought forward from previous tax years can offset gains. For individual taxpayers, such losses do not reduce net gains below the annual allowance, so the annual exemption is not wasted.
Residence and domicile status
Individuals who are resident or ordinarily resident in the UK are liable to CGT on gains from disposing of assets wherever situated. Individuals who are neither resident nor ordinarily resident are not normally liable to CGT unless they are temporary non-residents, or trade in the UK and dispose of UK assets used for the trade.
- UK resident individuals who are resident and ordinarily resident outside the UK for less than five tax years starting after 16 March 1998 are normally liable to CGT on their return to the UK on disposals abroad of assets acquired before their departure (re-entry charge).
- There is no re-entry charge for individuals who were not resident and not ordinarily resident in the UK for four of the seven tax years before the year of departure, or in respect of periods of non-residence starting before 17 March 1998.
- Non-UK domiciled individuals who are resident or ordinarily resident in the UK or are temporary non-residents are taxable on non-UK gains only to the extent they are remitted to the UK.
Major Changes that took effect from 06 April 2008
From the 2008/9 tax-year, a major overhaul of the Capital Gains Tax regime will come into effect. Instead of the complicated system of indexation and taper-relief (depending on when you purchased the asset), there will be a single flat rate of 10% on all Capital Gains, irrespective of the length of time that you owned the asset.
The aim is to simplify the previously complicated regime, and whilst on the whole this is largely a good thing, there will be winners and losers. This depends upon factors such your current highest marginal tax rate and the length of time you have held assets (i.e. whether you have taken advantage of taper relief, or trade assets on a regular basis).
The main changes involve:
- The withdrawal of taper relief (there is no retrospective exemption for assets held before 6 April 2008)
- The withdrawal of indexation allowance (this only affects assets that were acquired before 6 April 1998)
- The removal of the ‘kink test’ (this rule stipulated that assets held on 31 March 1982 were valued for CGT purposes at their market value as of that date.)
- Streamlining of the share identification rules. From 6 April 2008 all shares of the same class in the same company will be treated as forming one single asset (known as a ‘share pool’), regardless of when they were originally purchased or acquired.
However, the same day rules and “bed and breakfasting” rules remain unchanged, and shares will be identified under those rules before they are identified with shares in the share pool.
The Annual Exemption remains in place. The first £3,000 of an individual's net gains realised during the tax year is free of CGT. (For Trustees, the Annual Exemption is £1,500 ). Any gains above this amount will face the flat rate CGT charge of 18%.
Husbands and wives are subject to CGT separately, each with their own annual exemption and tax rates. Transfers between spouses living together are not liable to CGT.
Other current CGT relief’s will continue to apply, such as: For example:
- Private Residence Relief.
- Business Asset Roll-Over Relief.
- Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) reliefs.
- Business Asset Gift Hold-Over Relief.
Changes that took effect from 23 June 2010
From this date, instead of one flat rate, there is now two band of Capital Gains Tax charged at basic and higher rates (or three if you take into account the rate charged to trustees and representatives of deceased persons).
Instead of the old system of charging at the highest marginal rate of income tax and using taper relief, we know have the following bands:
- A flat rate of 10% for any chargeable gains that fall within the basic rate band of income tax.
- A flat rate of 20% for any chargeable gains that fall within the higher rate band of income tax.
- A flat rate of 20% for any chargeable gains realised by trustees and representatives of deceased persons.
There is also a special 10% rate, avaialable under certain circumstances. This is usually applicable in cases where shares are eligible for Entrepreneurs' Relief, share options issued under an Entreprise Management Incentive (EMI) Scheme and other similar schemes.
For most basic rate taxpayers who make small gains (such as by selling shares), the basic rate will most likely apply. However, things get more complicated if large gains are realised, i.e. by the sale of a second home. This is due to a quirk in the tax rules that state that income and total capital gains are added together to determine the relevant tax rate. This could drag a basic rate taxpayer into the higher rate bracket.
If a large gain is realised by a basic rate taxpayer, the total gain is added to taxable income. The portion of the gain that falls below the higher rate tax threshold will be taxed at 10%, while the portion of the gain that falls above the higher rate tax threshold will be taxed at 20%. Effectively this has the effect of top-slicing the gain, and the effective rate of CGT will be in the range of 10% - 20%
The Calculator
This calculator has been modified, due to the fact that working out CGT liabilities is now much easier that it was previously. It has been altered to allow you to enter multiple gains (or losses) incurred in the current tax-year and carry forward unused losses in order to work out if you face a CGT charge in the current tax-year.
Due to the changes in 2010, it is now possible to specify your income tax band, and also your total taxable income and personal allowances. It is RECOMMENDED that you input these amounts, especially if large gains have been realised, as this will allow more accurate calculations to be made.
It is also possible to input losses in the current year and losses carried over from previous years, as it will now calculate whether any losses can be carried over into future tax years.
You also have the ability to add a special rate to override the standard basic and higher rate bands. If you have shares that benefit from the 10% or similar rate, you can enter the rate, but also add other gains that will be calculated at the standard CGT rates.
The figures projected by the calculator are only for guidance purposes - whilst we aim to ensure the accuracy of our calculators, we can take no responsibility for the usage made of the calculations generated on this site.
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