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Capital Gains Tax (CGT)
The return you get from many investments divides neatly into two parts.
First, there are the income payments which the investment produces and, secondly, its capital growth. With an equity investment, for example, the shares you own will produce both income from the dividends and - with luck - capital growth from a rising share price. The Government taxes both elements of this gain, the first through income tax, the second through CGT.
For the 2008/2009 tax year CGT is charged at a flat rate of 18% on chargeable gains over £9,600 and taper relief and indexation allowance is no longer applied.
There are financial products available that can help you minimise or defer your capital gains tax liability. Investing through Individual Savings Accounts is an ideal way to minimise the tax as no capital gains tax is paid on any profits made. There are other products available which offer capital gains tax breaks and an IFA can discuss the options with you.
Please note: Thresholds, percentage rates and tax legislation may change in subsequent finance acts.
