business & tax

Capital Gains Tax Calculation

Calculation of Capital Gains Tax CGT - How Capital Gains Tax is Calculated?

Firstly, you need to work out the gain or profit.  This is done by deducting from the sale price or valuation on the date a gift is made, things like the original purchase price, including legal fees, any money spent on improvements and costs for selling or gifting the property.

Calculation of the gain - Rules after 6 April 2008

• Work out the sale price or market value
• Deduct any costs incurred when buying the asset e.g. legal fees, adviser fees, stockbroker fees, stamp duty
• Deduct any enhancement or improvement costs not maintenance costs
• Deduct any costs incurred in selling the asset e.g. auction fees
• Deduct any capital losses incurred for other assets
• Deduct your annual exemption
• Result is the amount chargeable to tax - the chargeable gain
  
• Gain is then tax at the current capital gains tax rates
  

Old Rules:  Calculation of the gains realised and made before 6 April 2008

• Work out the sale price or market value
• Deduct any costs incurred when buying the asset e.g. legal fees, adviser fees, stockbroker fees, stamp duty
• Deduct any enhancement or improvement costs not maintenance costs
• Deduct any costs incurred in selling the asset e.g. auction fees
• Deduct any allowed indexation allowance (for assets acquired before April 1998)
• Deduct any capital losses incurred for other assets
• Calculate any taper relief
• Deduct your annual exemption
• Result is the amount chargeable to tax - the chargeable gain
  
• Gain was added to your income
  
• It was then taxed at either 10%,20%, 40% depending upon whether you were a lower, basic or higher rate tax band
  

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