What Is Capital Gains Tax?
Capital gains tax is a tax on profit when you sell or give away an asset. It’s the gain you make that’s taxed, not the total amount of money you receive. The profit is calculated by subtracting the original purchase cost from the sale proceeds. If you are selling a property, you can also deduct certain costs related to the sale and purchase and certain costs incurred on improving the property.
In some cases, the market value is used instead of the sale proceeds. This is the price the assets could be reasonably expected to sell for in an open market. You would use the market value if you give the property away, sell it at a reduced cost or pass it on to a connected person (such as a family member).
Your liability to UK capital gains tax depends on your residence and domicile status. It is crucial to understand your capital gains tax allowance in your country of residence and the law regarding your tax liabilities in the UK too. If the assets are located in a different country, the tax law, rules for tax relief set out in the Double Tax Treaty and capital gains tax on property will also need to be considered.
On 6 April 2015, the UK introduced a capital gains tax charge on the sale of UK residential property by non-residents. If you are non-UK resident and you own UK residential property, you should seek advice as to the implications of these new rules in your particular situation and how they interact with the tax position in your country of residence.
As with all international taxation advice, you should seek advice both on your chosen country of residence and UK tax law before making important investment decisions. Capital gains tax is a complex area and one in which mistakes can be made. For this reason, it is important to seek professional advice, preferably before you sell any assets.
At Forth Capital, we will look at the optimum time for you to sell assets to mitigate your UK and overseas tax liabilities. It may be more tax-efficient to sell assets prior to your move overseas, or prior to your return to the UK, depending on the type of asset, the level of gain and the country you are moving to or from. If your intended country of residence has a more favourable capital gains tax regime, it might be best to wait until you become resident there before you sell.
Our specialist advisers can help answer your key questions on capital gains tax:
– When is the right time to sell my assets?
– How much is capital gains tax on property?
– How do I ensure I meet all my tax obligations both in the UK and abroad?
– How do I calculate capital gains tax when living abroad?
– What exemptions and reliefs could I be entitled to?
– How does capital gains tax work with inherited assets and property?
Forth Capital – Capital Gains Tax Advice
Understanding your potential capital gains tax liabilities, as well as any reliefs and deductions available, from both a UK and an overseas perspective is a vital part of any tax planning. Differences in the tax rules can open up tax-planning opportunities that may not otherwise be available to you. We will advise you on the most tax-efficient solution in your circumstances.
Our tax advisers are all qualified Chartered Tax Advisers and members of the Chartered Institute of Taxation.
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