Capital Gains Tax is frequently overlooked, so this week Chris Deakin sheds light on it in his latest article for ContractorUK.
What is Capital Gains Tax and when does it apply?
Capital Gains Tax (CGT) was first introduced back in 1965 by James Callaghan, the-then chancellor in Harold Wilson’s Labour government. The original aim was to prevent tax avoidance in the form of people switching their income into capital. With the Summer 2015 Budget around the corner, it’s likely that George Osbourne will be once again making changes to CGT.
To refresh your memory, CGT is a tax on the increase in value of possessions such as company shares, antiques or a second home during the time you have owned them. The tax is due when you dispose of them, when selling or giving them away.
When does capital gains tax apply to contractors?
CGT applies to both personal assets and property. If you make a gain from sale, for example, you may need to pay capital gains tax. It may also apply when you close a company. It’s worth taking a look at the many exceptions and tax-free thresholds, though. This could be an opportunity to save some of your hard-earned cash while following your passion for vintage cars, pleasure boats or antiques.
Find out more about the tax-free allowance and when you may be exempt from paying in Chris’ full article.