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The Capital Gains Tax (CGT) is a special type of tax that the government charge on the profits that we earn yearly. According to the rules, any profit that we earn in excess of the allowance on a yearly basis should be paid off to the government as CGT.
The tax amount for CGT varies from person to person. The amount to be payable as tax depends upon the capital gain per year which is achieved from the asset that we owe and also it compute the time period of how long we hold the asset before we achieve the gain.
The rules of Capital Gain Tax are different for the non-business assets and business assets. According to the rule passed in 1998, the lesser tax amount is to be paid if the particular asset is held for longer period.
Capital gain or loss comes in calculation when we generally give away our asset to anyone, if our owned assets somehow get destroyed or if we loose it for any reason. Generally, the most important circumstances for calculating capital gains arises when we sale any asset and earn much profit. Getting compensation money or giving something away also entitles to pay the Capital Gain Tax.
Capital Gain Tax have some exceptions as well. Exception applies in the following situations: donating items to a registered charity or if we just pass away or sale any belonging, which is less than £6000.
If we sale our private car or sale our house, we do not need to pay the CGT. Lottery winnings, payments received from premium bonds, personal injury compensation, etc. are also exceptions where we do not need to pay taxes.
There are different rates of the Capital Gains Tax varies according to the different levels of income. It is very important to remember that the date of sale or acquisition of the asset while calculating the amount of the Capital Gains Tax.