Calculating the Tax
The basic principles are quite straightforward :-
(Proceeds from Sale**) - ( Indexed Cost ** inc dealing/legal costs if applicable) - (previous losses not already utilised) x Taper Relief - Annual Exemption = Taxable Gain
While this is all well and good for simple transactions, such as the purchase of a property, the details get very complex for other investments like shares and unit trusts.
For Stocks, shares and other investments you may need to be familiar with Pooling, the pre and post 1982 rules, scrip dividends and capitalisation issues, last in first out for post 6th April 1998, and same day and 30 day rules where the you have being buying/selling the same stock on those timescales etc. It can be a minefield and good advice is essential if you suspect that your disposals may generate a potential gain in excess of your allowance.
** This might be the actual price paid, but in the event of gifts or inheritances then it may be one of the following:-
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Gifts that were exempt from CGT (e.g. a transfer from spouse) at the time of transfer. You need to know what the donor originally paid.
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Inheritances. You need the probate values.
Where the acquisition cost information is NOT available then it is necessary to engage in discussions with the HM Revenue and Customs to determine some reasonable estimate as to original cost. We can assist in this.
NB: Indexation is not available for periods of ownership after April 1998 (Except for Company business assets).
Last updated on April 18, 2007