1. What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax on the profit when you sell (or 'dispose of') something (an 'asset') that's increased in value. It's the gain you make that's taxed, not the amount of money you receive.

2. How Does the Calculator Work?

The calculator uses the basic CGT formula:

Where:

• \( Disposal\ Proceeds \) — Amount received from selling the asset (£)
• \( Cost \) — Original purchase price or acquisition cost (£)
• \( Rate \) — Applicable capital gains tax rate (%)

Explanation: The equation calculates the taxable gain (proceeds minus cost) and then applies the tax rate to determine the tax due.

3. Importance of CGT Calculation

Details: Accurate CGT calculation is crucial for tax planning, financial decision making, and ensuring compliance with tax regulations.

4. Using the Calculator

Tips: Enter disposal proceeds and cost in GBP, and the applicable tax rate as a percentage. All values must be valid (proceeds > 0, cost ≥ 0, rate between 0-100).

5. Frequently Asked Questions (FAQ)

Q1: What counts as a disposal?
A: Selling, gifting, transferring, or exchanging an asset all count as disposals for CGT purposes.

Q2: Are there any allowances or exemptions?
A: Most countries have annual tax-free allowances and certain exemptions (like main residence relief in the UK).

Q3: How is the rate determined?
A: Rates often depend on the type of asset, your income level, and whether you're an individual or business.

Q4: What costs can be deducted?
A: You can usually deduct original purchase price, improvement costs, and certain selling expenses.

Q5: When is CGT payable?
A: Payment deadlines vary by country, but it's typically due when you file your annual tax return.