Brentwood accountants warn of the often-overlooked pitfalls of Capital Gains Tax

Brentwood-based accountancy firm M J Bushell is trying to raise awareness of the UK’s complex Capital Gains Tax (CGT) regime, amid concerns that many self-employed business owners and individuals do not fully understand how CGT affects disposals.

In the UK, the disposal of an ‘appreciating asset’ – which could range from commercial premises or a buy-to-let property to valuable jewellery – will often incur CGT.

When disposing of a taxable gain, individuals can potentially incur a hefty tax bill if they do not tread carefully, M J Bushell has warned.

Dan Sayers, a Director at M J Bushell, said that individuals ought to be aware of the rules surrounding private residence relief – which are not quite as simple as they first appear.

“Under the rules of private residence relief, individuals will not incur CGT on the disposal of their main residential property. However, if a property has previously been let out or used for business purposes, it could still be liable for CGT,” he said.

“The same applies on the disposal of any unusually large properties – as homes of more than 5,000 square metres will also fall foul of the private residence relief rules.”

Dan added that self-employed businesses also needed to be careful when disposing of any business assets such as land and buildings, plant and machinery, shares, fixtures and fittings, registered trade marks and goodwill.

“It is important to seek specialist tax advice in order to determine whether a disposal will qualify for CGT and if tax liability can be mitigated in any way,” he said.

“Individuals will only be required to pay CGT on gains above their Annual Exempt Allowance of £11,300, while sole traders and other business owners might be able to benefit from Entrepreneur’s Relief – which enables CGT to be reduced to a rate of just 10 per cent.”

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