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Capital gains tax

Q: Can you explain what rate of entrepreneur's relief from capital gains tax (CGT) will apply to me? My share in the surgery where I am a partner is worth £140,000. On retiring, I would like to know what percentage of the value will be deducted as entrepreneur's relief before calculating CGT.

A: CGT is payable on the difference between the sale proceeds and the original cost of an asset. Each individual has a CGT annual exemption of £10,100. Gains above this are taxed at 18 per cent for basic rate taxpayers and 28 per cent for higher/additional rate taxpayers.

You may qualify for entrepreneur's relief if the asset was used in your business for one year prior to the disposing of it, but you would need to make a complete withdrawal from the partnership.

Disposals made after 23 June 2010 that qualify for the relief will be taxed at 10 per cent.

If the net gain you make (after deducting what you paid to acquire it) is £100,000, assuming you qualify for entrepreneur's relief and are a higher rate taxpayer, the capital gain would be:

  • Net gain: £100,000
  • Annual exemption: £10,100
  • Taxable gain: £89,900
  • CGT at 10%: £8,990

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