Capital Gains Tax

Capital Gains Tax can apply to self-employed sole traders or those in business partnerships.
It is a tax on the gain (in other words, the profit) you make, if an asset you dispose of has increased in value since you acquired it.

Other organisations such as limited companies pay Corporation Tax on profits from selling assets.

The sort of assets a business may have where any profits would be covered by Capital Gains Tax include:

• land and buildings
• fixtures and fittings such as equipment
• plant and machinery
• shares
• trademarks
• your business’s reputation

Capital Gains Tax is only payable when you dispose of part or all of that asset, for example, selling, transferring or exchanging it.

There are situations where you can get tax relief which may reduce or delay the Capital Gains Tax you need to pay, for example:

• there may be a lower rate for sole traders, business partners or those with shares in a ‘personal company’ when they sell the business
• replacing an asset you've disposed of may delay payment of Capital Gains Tax
• if you give away a business, the person gifted the business will pay tax when they sell it however, before making a decision to gift a business, professional advice should be sought about other tax considerations such as Business Asset Disposal Relief (formerly called Entrepreneur's Relief)

You must keep records of any purchase or disposal of assets as well as any costs associated with the asset to support your tax return.

If your gain in a tax year is more than the tax-free allowance, you must report this to HMRC. If you haven't received a tax return, you will need to request one.

You can claim allowable capital losses and make a negligible value claim if an asset you own has become worth next to nothing while you’ve owned it.

Capital Gains Tax can be a complex area. The government website provides guidance on Capital Gains Tax for businesses and you may need expert advice from your accountant.