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Public Funding for Criminal Cases
Do Bailiffs Have Any Legal Power
Collective and Enforcement Insolvency
Individual Voluntary Agreements
Supreme Courts Ruling Bank Charges
Refunds of Any Bank Reimbursement
Reducing Capital Gains Tax Liability
Reclaim Payment Protection Insurance
Cancelling Payment Protection Insurance
In its simplest from Capital Gains Tax is a form of taxation which must be paid on any profits which are made from any of your investments.
An individual will only be required to pay Capital Gains Tax on investments which are over a specified amount called the annual capital gains allowance.
The Annual Capital Gains allowance for individuals for 2009-10 is set at £10,100.
Following the abolition of the 10% Capital Gains Tax rate all individuals are liable to pay Capital Gains Tax on all capital gains over the £10,100 threshold at a rate of 18%.
The amount of Capital Gains Tax which an individual will pay depends on the period of time for which they have held that asset.
For example, any asset which is bought after 5 April 1998 a process called “taper relief” will apply. Taper Relief means that the longer you hold the asset for the less tax you will have to pay on any of the gains which you may have made.
Currently there are two kinds of taper relief. They are as follows:
Taper relief for business assets
Taper relief for non-business assets
The tax regime for business assets is the most favourable of the two. Basically it breaks down to if an individual holds an asset for more than two years they will only pay tax on 25% of the gains made by that investment.
If you owned the asset on or before 5 April 1998 you may be able to reduce the taxable gain by claiming indexation allowance. Indexation allowance will reduce the effect of inflation over the years since you first bought the asset.
You will be required to pay Capital Gains Tax on the following gains:
If you stop owning, by way of selling, giving away or exchanging any asset or part of that asset
If you receive any because of an asset – this may occur when you receive compensation due to any damage to an asset
The following gains are exempt from the requirement to pay Capital Gains Tax for 2010:
The sale of your car
The sale of your main home – there are however, some qualifying conditions in relation to this
Cashing in on ISAs or PEPs
The sale of personal belongings up to £6000 in value
Winnings that have been made by gambling, the lottery or the football pools
Any money which will be included as part of your income which you will already have paid income tax on
If you complete a Self Assessment tax return, there will be a requirement to complete a specific section dealing with Capital Gains Tax.
If you do no not complete a self assessment tax return but you wish to report gains or losses then you should contact your local tax office.
Gains should be reported by 5th October following the end of the tax year.
You can reduce the amount of Capital Gains Tax you are required to pay using the following techniques:
Offsetting losses against gains
Transferring assets to your spouse
Transferring assets to a charity
Making the best use of the exemptions
Deferring the gain
Selling assets and buying them back
If an individual holds a range of assets there is the possibility that the individual will also record losses on some of the assets. This is most common in the situation whereby an individual holds a variety of different shares. If this is the case the best course of action is to dispose of the assets which have shown a loss at the same time. Accordingly the individual can then set that loss against a taxable gain.
The Capital Gains allowance applies specifically to individual persons. This means that a married couple will have a Capital Gains allowance of £20,200 for 2009-2010 compared to an individual who has a Capital Gains allowance of £10,100. If an individual transfers assets to their spouse to dispose of then they can effectively double their Capital Gains allowance.
Furthermore gifts which are transferred between a husband and wife who are living together are ignored for the purposes of calculating Capital Gains Tax.
However, you cannot simply provide assets to your children in order to try and avoid paying Capital Gains Tax.
If you transfer any of your assets to a registered charity then you will not be required to pay Capital Gains Tax.
You can make the best use of the above exemptions to reduce the amount of Capital Gains Tax you will be required to pay on your assets. For example, if you own two homes you can decide which one you wish to treat as your primary residence for tax purposes within two years of acquiring the second one. You can make the best use of the above exemption simply by choosing the one with the greatest increase in value. Accordingly when you sell this house you will not be required to pay Capital Gains tax on the profit you make thereby reducing your total payable Capital Gains Tax.
If you do not have any losses or reliefs which you can use to offset your tax bill you can defer the payable Capital Gains Tax by reinvesting the gain in the following:
Venture capital trusts
Shares of certain small companies
You can reduce the amount of Capital Gains Tax which you are required to pay by selling your assets and buying them back. This reduces the requirement to pay Capital Gains Tax on long-term investments.
It used to be the position that you could sell the assets and buy them back the next day. However, this is now outlawed until after 30 days from the original sale.
An individual still has the following options available to them when buying back assets:
An individual can arrange for their spouse to buy an identical holding
An individual can immediately buy something similar
An individual can buy an option to protect against a price increase during that 30 day period
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