Question 1

What is capital gains tax, and when does it apply?

Accepted Answer

**Capital gains tax (CGT)** is tax on the **profit** made when you dispose of an asset that has risen in value — not on the amount you receive, and not on the asset itself.

**The core idea.** Gain equals **disposal proceeds minus acquisition cost**, minus allowable costs. If you bought something for £10,000 and sold it for £25,000, the gain is £15,000, and that is what is potentially taxed — not the £25,000.

**"Disposal" is broader than selling.** It includes giving an asset away, exchanging it, or receiving compensation for its loss or destruction. Gifting to anyone other than a spouse or civil partner is a disposal at **market value**, which catches people out badly.

**What is typically within scope in the UK:** second properties and buy-to-lets, shares and funds held outside a tax wrapper, business assets, and valuable personal possessions above a threshold.

**What is typically outside it:** your **main home**, through private residence relief; assets held inside an **ISA or pension**, which is much of the point of those wrappers; UK government gilts; personal cars; and transfers between spouses or civil partners, which pass at no gain and no loss.

**How it is calculated.** Each person has an **annual exempt amount** — a tax-free allowance of gains each year, which has been **reduced substantially** in recent years, bringing many more people into the tax. Above that, the rate depends on the type of asset and on your income tax band, since gains are treated as sitting on top of income.

**Allowable costs** include acquisition and disposal costs such as legal fees and stamp duty, and **capital improvements** — an extension, not repairs or decoration. Keeping records of these is essential and frequently neglected for decades.

**Losses** can be set against gains in the same year and carried forward indefinitely if reported, which is a commonly missed step.

**Reporting and payment** deadlines differ by asset — UK residential property disposals have a short separate deadline, distinct from self assessment.

**Rates, allowances and deadlines change frequently.** Check current HMRC guidance and take advice for anything substantial.

General information, not tax advice.

Question 2

How do inheritance tax thresholds work?

Accepted Answer

Inheritance tax (IHT) in the UK is charged on the value of an estate above a threshold when someone dies. The structure involves several allowances that interact, which is why the commonly quoted

Question 3

What is VAT, and how does it actually work?

Accepted Answer

A tax charged at every stage of production, where each business pays tax on the value it adds and reclaims what it paid its suppliers — so the full burden lands on the final consumer while being

Question 4

Who actually has to file a self assessment tax return?

Accepted Answer

Anyone whose income is not fully taxed at source or whose circumstances fall into defined categories — and the obligation is yours to identify, which is the part that catches people out. Nobody

Question 5

What is an ISA and how do the allowances work?

Accepted Answer

An Individual Savings Account is a UK tax wrapper. Money inside it grows free of income tax and capital gains tax, and withdrawals are tax-free. It is not an investment itself — it is a container

Question 6

What is a tax code, and why might mine be wrong?

Accepted Answer

A tax code tells your employer or pension provider how much tax-free income to give you before deducting tax. It is issued by HMRC, applied by your employer, and it is wrong more often than people

Question 7

What is the difference between a pension and a savings account?

Accepted Answer

A savings account is money you can access whenever you like. A pension is a long-term, tax-advantaged wrapper you generally cannot touch until a set age — and that restriction is the price of

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