Introduction Guided Tour Customer Services What is CGT?

What is CGT?

Following the Government’s last budget, the need for private investors to understand the implications of Capital gains tax (CGT) is now greater than ever. To help customers understand some of the issues, Updata’s CGT expert, John Scurr discusses some of rules. John designed the CGT module in Portfolio Professional to help investors optimise their tax exposure.

Building a profitable portfolio takes time and work but realising those gains can have serious implications that many private investors risk overlooking.

Any private investor who makes profits above the Capital Gains Tax threshold of £7,200 this year outside a PEP or ISA has a tax liability. The maximum rate for CGT is 40%, but there are various rules offering tax relief that all investors should be aware of to optimise their tax exposure.

The main rules are:

• The 30 Day Rule - introduced to avoid the cumulative CGT liability
  
  

• Indexation and Taper Relief - The longer you hold a share before selling, the more tax relief you can claim.
  
  

• Business Assets - Now that all AIM and OFEX stocks count as business assets, private investors can benefit from CGT relief.
  
  

• LIFO - matching the Last In First Out rule.
  
  

• Further Rules- It gets more complicated!
  
  

Legislation changes in recent budgets have made CGT so complex that even your accountant will have difficulty keeping up. Now you need to be aware of what the CGT rules were before the changes, the dates when the changes were implemented, and what the current rules are. If you have transactions dating back to before and after April 1998 both sets of rules might apply complicating the issues further. Needless to say, the more transactions you make, the more complex the process becomes.

• Advanced Portfolio
  
  

• Capital Gains
  
  

• Fundamentals
  
  

• Reporting