Changes to UK capital gains tax

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capital-gains-taxWhat is capital gains tax?
Capital gains tax abbreviated to CGT is a tax on profit (gains) from the sale of non-inventory assets if the sale price is higher than that of the price it was purchased at. Capital gains tax is most common on assets such as stocks, bonds and precious metals however when the average person is talking about capital gains tax they are normally referring to the tax on profits from the sale of property. Capital gains tax is not adopted by all countries and the one that do implement it do so at a variety of different rates. The rates for the UK are 18% and 28% for individuals (the tax rate you use depends on the total amount of your taxable income and gains) please follow this link to the UK HMRC for more details
When does Capital gains tax apply?
If you dispose (sell) of an asset for more than £6000 generally speaking you should pay some kind of tax, however there are many exceptions to this for example personal possessions, motor vehicles and most importantly your main home or dwelling. Contrary to popular belief inheritance for example a property is not automatically liable to be taxed, rather only when you sell it does it become liable, though at the time of inheritance it should be evaluated to understand its value so at the time of sale it can be worked out if there has been a gain or a loss, and therefor if and how much it should be taxed.
Changes to the UK Capital Gains Tax
As of April 2015 changes to the implementation of capital gains tax will come into force, before the change foreign investors and expats were not taxed on capital gains as the resided outside of the UK, however the Government is trying to close this ‘loop hole’, but some are concerned that one of the side effect will be a drop values of property specifically in the London area.
How non-UK residents will be taxed
When a non-UK resident sells a property they are liable to capital gains tax in the same way a UK resident would be taxed, meaning they will benefit from an exemption on £11,100 for 2015/16 with a rate of either 18% or 28% depending on other UK based income and gains. The UK has many double taxation treaties with other jurisdictions, each jurisdiction will have to look into their specific treaty though most will allow tax’s to be paid in the jurisdiction the property was sold in. Any taxes paid by non -residents would be expected to be credited against any tax obligations the individual has in their county of residence. Therefor individuals who reside in a jurisdiction that has no treaty with the UK will feel the most effects meaning for the rest it will be a case of how much and to which jurisdiction they will pay their dues.
Advice on Jurisdictions and taxation
Eltoma Corporate Services works with over 20 jurisdictions with highly experienced accountants in most, so if you’re looking for advice on the benefits of one jurisdiction over another with regards to taxation please feel free to take a look at our web site and if you can’t find the answer to your questions there we would be more than happy to give you a free consultation just call anyone of our offices or send us an email. For contact details please follow this link.