What is capital gains tax?

Question

What is capital gains tax?

Answer 1

Capital gains are  the profits made on an investment (stocks, real estate, etc.).  The tax  on these profits (capital gains tax) is determined by the length of time the investment is held and also by the type of investment.

Answer 2

You may have to pay CGT if you dispose of an asset, or receive a sum of money in respect of an asset. Its very complicated but the long and short of it is this; You only have to pay CGT on disposing of an asset if you have made a chargeable gain. Typically, you make a gain if the asset is worth more than it was when you acquired it.

You will only have to pay CGT on a sum of money in respect of an asset if it was a capital sum (a capital sum is one that does not form part of your income for income tax purposes).

You may be treated as making a gain even if you do not receive any money for the asset. For example, you may have to pay CGT if you give an asset to your child. Certain kinds of asset do not give rise to a chargeable gain when you dispose of them. For example, you will not normally have to pay CGT if you sell your home. Also, certain kinds of disposal do not give rise to a chargeable gain. For example, you will not normally have to pay CGT if you sell or give an asset to your husband or wife.

Bet you wish you hadn't asked now. lol

Answer 3

It's a tax when you sell something that used to be part of your business.  E.g. if you sell your computer equipment, a property you let, a van you used to transport things.

There are fairly complicated rules to work out what it is as you have to subtract the purchase price and there's an allowance for wear and tear.