Taxation of Chargeable Gains Act 1992
Encyclopedia
The Taxation of Chargeable Gains Act 1992 is an Act of Parliament
which governs to levying of capital gains tax
in the United Kingdom. Capital gains tax is a tax charged on the increase in the capital value of an asset between purchase and sale of that asset.
The tax operates under two different regimes for a natural person
and a body corporate. For a natural person the tax is levied at a rate determined by the highest rate of income tax
which that person pays. If the person is a higher-rate tax payer then the higher rate of income tax (currently 40%) is charged on the gain. The rates of capital gains tax are the same as those for earned income. Each year a natural person has an amount of gain which is exempt from tax. Bodies corporate by contrast have capital gains tax charged as additional corporation tax. The chargeable gain is treated as additional profits for the accounting period in question. Bodies corporate have no allowance for gains free form tax.
Various reliefs from capital gains tax exist. These include indexation relief, where the amount of gain subject to tax is reduced by factoring in general price inflation and taper relief where set percentages of the gain are exempt from tax if the asset has been held for a certain length of time.
The Act has been amended yearly by the subsequent Finance Acts.
Act of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
which governs to levying of capital gains tax
Capital gains tax
A capital gains tax is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property...
in the United Kingdom. Capital gains tax is a tax charged on the increase in the capital value of an asset between purchase and sale of that asset.
The tax operates under two different regimes for a natural person
Natural person
Variously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner...
and a body corporate. For a natural person the tax is levied at a rate determined by the highest rate of income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
which that person pays. If the person is a higher-rate tax payer then the higher rate of income tax (currently 40%) is charged on the gain. The rates of capital gains tax are the same as those for earned income. Each year a natural person has an amount of gain which is exempt from tax. Bodies corporate by contrast have capital gains tax charged as additional corporation tax. The chargeable gain is treated as additional profits for the accounting period in question. Bodies corporate have no allowance for gains free form tax.
Various reliefs from capital gains tax exist. These include indexation relief, where the amount of gain subject to tax is reduced by factoring in general price inflation and taper relief where set percentages of the gain are exempt from tax if the asset has been held for a certain length of time.
The Act has been amended yearly by the subsequent Finance Acts.