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What is a capital gains tax?

Capital gains tax

CGT is a tax that you pay on any profit you make when you dispose of or sell an asset, for example, shares. You just pay tax on the increase in value, not the whole amount that you receive when you sell the asset.

Where have you heard about capital gains tax?

If you have had to fill out a tax form you might have seen a section on capital gains. The rate of tax may also be talked about in the Budget. For example, in the UK's 2016 Budget the 18% rate of CGT was cut to 10% and the 28% rate reduced to 20% for chargeable gains.

What you need to know about capital gains tax.

Most governments include exemptions for assets that you don't have to pay CGT on. Typically this would be savings and investments that are given a tax advantage and your main residence. But a landlord would have to pay CGT if they sold a property that they rented out.

If you give away an asset you can be charged CGT if the gift is to someone other than your husband, wife, civil partner or a charity. If your spouse or civil partner may then have to pay the tax when they dispose of the asset. The gain or loss will be calculated from when they or you first owned it.

Find out more about capital gains tax.

Read how capital gains are taxed in the OECD - Harding, M. (2013), Taxation of Dividend, Interest, and Capital Gain Income, OECD Taxation Working Papers, No. 19, OECD Publishing, Paris.

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