Business Matters
Capital Gains Tax (CGT)
As things announced in the June budget become clearer, I feel it's important to let you know a bit of (relatively) good news for a change.
I believe that everyone by now knows that the "new" rate of Capital Gains Tax is 28% and that applies to all disposals of assets on or after 23rd June 2010.What fewer people know is that the original rate of CGT is still in existence and is still applicable AFTER 22nd June.
The system is now very like the old system of Capital Gains Tax with two rates this time - 18% for gains up to the top of the basic rate band and 28% for gains that fall above the basic rate band.
A simple example might make this really clear:
Jim sell his buy to let property and makes a taxable gain of £30,000.
Scenario 1: Jim has a small pension of £10,000
Scenario 2: Jim has a salary of £17500 per year
In Scenario 1, Jim pays tax on his Capital Gains at 18% only = £5400 in tax
In Scenario 2 Jim pays tax as follows:
Total Income £47500. After deducting his personal allowance of £6475, he has taxable income of £41025. He pays tax at the basic rate (20%) on £11025 and Capital Gains Tax at 18% on £26375 of the gain and 28% on the rest (£3625). His total Capital Gains Tax bill is £5762.50
Yes it is a little more than it would have been before 23rd June. But there are lots of ways to minimise the impact of CGT. If you need to more just contact me and ask.
JohnF
RSS