The profit that a person makes when s/he ceases to own an asset is considered to be a taxable amount in the United Kingdom. This tax is known as the Capital Gains Tax. However, it is not as simple as merely selling an asset. The gain can also be taxed if the asset is given away as a gift, is transferred to someone else, is exchanged for something else or even if compensation for the asset is received.
How it works
If an individual buys shares for £1000 in June 2000 and sells them for £10000 in
June 2010, he has made a profit of £9000. This amount is then, subject to the Capital Gains Tax rate. An individual
If you are acting as an individual and you have made a profit from a Capital Gains transaction, you will be charged at a rate of between 18-28 percent of taxation.
18 percent is the flat rate, but this rose to 28 percent for higher earners as of
June 2010. A company
The calculation for companies is slightly more complex than for individuals. Companies use what is known as "indexation relief" to the base cost. It is increased according to the retail prices index. This means that the profit is calculated on an inflationary basis. Once the profit has been calculated, the company is taxed at the appropriate marginal rate of company tax.
Some assets are exempt from Capital Gains Tax. These include your car: personal possessions that are worth up to £6000 each, such as jewellery, paintings or antiques; stocks and shares that are held in tax-free investment savings accounts, such as ISAs and PEPs; UK state or 'gilt-edged' securities such as National Savings Certificates, premium bonds and loan stock issued by the Treasury; betting, lottery or pools winnings; personal injury compensation and foreign currency held for personal use outside the UK. Corporation Tax Act 2010
Capital Gains Tax is outlined in the Corporation Tax Act 2010. It is an act of parliament that received royal assent in March 2010. Reporting a loss
When an asset loses most or all its value, the owner may be able to claim this as a loss, even if he still owns it as an asset. The only prerequisite is that the asset must have lost its value during the time that s/he owned it. If this is the case, a negligible value claim can be made.