One easy area in the tax exams is computing tax on gains by individuals.

The first aspect to appreciate is many assets are exempt from CGT such as cash, cars, QCBs, chattels worth less than £6,000, and the principal private residence.

Common chargeable assets include buildings and shares. To find the gain is simple (sale proceeds less cost). Current capital losses must be deducted from the gains before deducting the annual exemption of £12,300.

However, brought forward capital losses can be restricted to preserve the annual exemption.

The taxable gain is then taxed as the individual’s top slice of income. The gain in the basic rate band is taxed at 10% whilst any gains above that are taxed at 20%. (for residential gains use 18% and 28% instead).

Business gains on assets owned for 2 years are eligible for business asset disposal relief (BADR) and taxed at just 10%. It is important to appreciate that the gain eligible for BADR consumes the basic rate band so normal gains will then be taxed at 20% while residential gains are taxed at 28%.

CGT is payable on the 31st of January following the tax year of disposal however for residential gains the tax is payable within 30 days from the date of completion.

Wishing you the best of luck in your exams. Get the CGT for individuals right. 

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