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Capital Gains Tax

Capital Gains Tax (CGT) is designed to capture transactions that fall outside of the general income tax legislation and are often charged to tax at a lower rate.

A common example of a transaction that falls under CGT rules is an individual selling a second property that has in the past been rented to tenants. The capital gain is the difference between the sale price (after adjusting for costs on sale) less purchase price (after adjusting for costs on purchase).

This may seem pretty basic but there are additional factors to consider:

  • How long did you own the property,
  • Did you ever live in the property,
  • How long did you live in the property,
  • Has there been any enhancement expenditure.


All of the above points will affect how much of the gain is chargeable to CGT and with these sorts of transactions generally being of high value, any omission of information in the calculation could cost you large amounts of additional tax.

No CGT computation is as basic as deducting cost from sale as there will always be additional factors to consider.

There are many instances of transactions that may be classed as a capital gain instead of income. It is important to be aware of this as the basic rate for capital gains can be as low as 18% compared to 20% income tax and 28% compared to 40% respectively for higher rate tax payers.

Due to the value of capital transactions it is always advisable to seek professional advice. If you have recently sold an asset and are concerned about how to report and calculate a capital gain, please contact us to arrange a free consultation.