Capital Gains Tax
Every tax year nearly everyone has an amount of capital gain that they can make without being liable for Capital Gains Tax, this is known as the ‘Annual Exempt Amount’ (AEA). For the tax year 2008/09 this AEA for individuals, personal representatives and trustees for disabled people is £9,600 and for the tax year 2009/10 it is increasing to £10,100, other forms of trusts have a AEA of 50% of these levels.
You pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any relief) are above this amount; the rate of tax payable is 18%.
What is important to appreciate about Capital Gains Tax allowances, it that despite us all having one, only a very small percentage of people actually use their annual allowance, if it is not used each year it is then lost for that year.
Many financial products if structured correctly can be used to utilise some or all of the Annual Exempt Amount, this can result in a highly tax efficient means of income generation.
For larger Capital Gains, there are a number of specialised product providers that can assist in helping to minimise and defer this type of tax.