When you give away or sell something that you own, and make a profit from it, you may be liable to pay a capital gains tax, or CGT. Examples of assets that that may be liable for a capital gains tax are land, buildings, shares, expensive antiques, jewelry, and/or paintings. You may even have to pay a tax if you get prize money or compensation of some sort. For some assets, like cars, personal items that are worth less than the threshold, and your primary home, you will not be required to pay a capital gains tax.
Managing your gains and losses can be tricky. You will need to inform HM Revenue & Customs, or HMRC, about your gain soon after it happens. Also, make claims for losses before the tax is due, or you will end up owing more.
You will need a lot of information when paying capital gains tax for your assets. First, you will need a description of the asset, such as the amount of shares, the size of land, or the value of an antique. They will also need to know the day you receive the asset and the day you disposed of it. Typically, they calculate the costs by how much you acquired for the asset, but sometimes they may use the market value. If you spend money improving the value of the asset, that is also included in the total cost.
So to work out the bill for your capital gains tax, you will need to add together all your gains for that year, and then subtract all your losses. Then, you subtract any allowable losses to find the overall gain. If your overall gain is below the Annual Exempt Amount or the amount that your assets must be worth in order to be exempt from paying the tax, then you don't have to pay the tax. If it is above it, you are liable to pay the tax. If this is the case, subtract any unused losses from the previous year from your total gain. If it is still above the Annual Exempt Amount, you pay tax at 18 percent of your overall gain.