Capital Gains Tax (CGT) is payable by individuals in respect of gains made from selling, or otherwise disposing of assets. The term assets covers all forms of property, including shares, machinery and the goodwill of a business.

Understanding CGT is important if you are looking to sell a business and use the proceeds to fund your retirement. For many people, selling or transferring a business may make them liable to pay CGT on their gains, including gains on their share of partnership assets. CGT can be complex and varies according to your circumstances. You can deduct certain allowable expenses in calculating your capital gain.

Even if you don't actually receive any money when you dispose of an asset, giving it away to somebody might still mean you have to pay CGT based on the market value of the asset. If an asset is transferred to another person, other than as a genuine, normal commercial transaction, at below the market value, the chargeable gain calculation will also be based on the market value, rather than the actual proceeds received.

You will not have to pay any CGT if your total gains are less than the annual exempt amount. Subject to certain conditions, CGT is not normally payable on the sale of your own home, or on transfers between a husband and wife, or between civil partners.

Before April 2008, chargeable gains on each disposal may have been reduced by taper relief. The Chancellor scrapped taper relief in the March 2008 budget and introduced Entrepreneurs’ Relief which is restricted to active participants in a business such as:

- Sole traders
- M embers of trading partnerships and
- Shareholders who own a minimum 5% stake (share capital and voting rights) and work as an employee or office holder of the company.

Allowable losses are deducted from chargeable gains and any remaining chargeable gains are then reduced by Entrepreneurs’ Relief. If the net total is equal to or less than the annual exempt amount, there is no CGT payable. The annual exempt amount for the tax year 2008/09 is £9,200.

If allowable losses are greater than chargeable gains, any surplus losses can be carried forward to be set against future capital gains. There is no time limit on when the losses have to be used. However, any loss arising in 1996/97 or later tax years must be claimed (ie notified to your tax office quantifying the amount) within five years and ten months of the end of that tax year, or it will not be allowable. For example, a loss arising in 2002/03 must be claimed by 31 January 2009.

To avoid paying tax you may not owe call Marriotts tax team on 01277 236200