Special Types of Tax

Capital Gains Tax

Anything you own is an asset. If you dispose of, or pass on an asset, you may have to pay tax on the difference between its cost (for purchases) or market value (for gifts) when you acquired it, and the sales proceeds or market value when you dispose or sell it. Some assets are, however, exempt.

These include sales or disposals of for example:

• Private motor cars
• Gifts to charities
• Some Government Securities
• Personal belongings where sale proceeds are less than £6,000
• Prizes and betting winnings
• Gifts of cash
• Assets held in ISAs
• Foreign currency for your own use.

Inheritance Tax

Inheritance Tax is charged at 40% on the value of assets (that is anything you own) and cash passing on death and gifts made within seven years before death (but there is a relief depending on how many years the gift was before the death).

The lifetime rate for gifts is 20%. However most gifts made during your lifetime are what are called potentially exempt. This means that if you live for 7 years after the gift it becomes totally tax free.

Inheritance tax is worked out on the value of your estate (your assets when you die less any expenses such as funeral costs). However, there is a threshold before you start paying tax, known as the ‘nil rate band’. The HMRC website gives details of the current threshold >>

It does not generally apply to assets passing between husband and wife or between civil partners

For more information about Inheritance Tax and tax in general when somebody dies you can get information from the HMRC website which covers both lifetime gifts and those on death.