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Frequently Asked Questions

Company obligations

Should I trade as a Limited Company, partnership or sole trader business?

The most appropriate format will depend on a number of different factors including taxation.

Inheritance Tax

What is the current threshold for Inheritance tax?

The threshold for deaths on or after 6 April 2004 is £263,000. If your estate (including assets held in trust and any gifts you have made within seven years of your death) is less than the threshold, no inheritance tax will be due on it.

What exemptions apply to Inheritance tax of the estate?

  • anything you leave to your spouse
  • anything you leave to a UK registered charity
  • any bills outstanding at your death (including your funeral expenses)

What happens if I leave everything to my spouse?

Anything that you give during your lifetime or leave on your death to your spouse is completely free of inheritance tax, but both of you must be domiciled in the UK.

Tax

What assets might lead to a Capital Gains Tax charge, when disposed of?

  • land and buildings
  • units in a unit trust
  • shares in a company
  • higher value jewellery, paintings, antiques & other personal effects
  • assets used in a business, such as goodwill

What assets do not normally lead to a Capital Gains Tax charge?

  • your private car
  • cash held in sterling
  • any foreign currency held for your own or your family's personal use
  • jewellery, paintings, antiques and other personal effects that are individually worth £6,000 or less
  • Savings Certificates, Premium Bonds & British Savings Bonds
  • UK Government stocks ("Gilts")
  • assets held in an Individual Savings Account (ISA) or Personal Equity Plan (PEP)
  • betting, lottery or pools winnings
  • personal injury compensation

In what circumstances would Capital Gains Tax be liable?

Capital Gains Tax is chargeable whether the assets are in the UK or abroad.

If you sell an asset
Typically, you have made a gain if you sell an asset for more than you paid for it. It is the gain that is taxed, not the amount you receive.

If you give an asset away
If you give an asset away, you normally look at what it is worth, not what you get for it. The same is true when you sell it for less than its full worth in order to give away part of the value.

If you dispose of an asset you had been given
You might dispose of an asset that you had received as a gift. When you work out the gain you normally use the market value of the asset when you received it.

If you have inherited an asset
If you inherit an asset, the estate of the person who died does not pay CGT at that time. If you later dispose of the asset, you work out the gain by looking at the market value at the time of the death

Some other cases where you might have to pay CGT
You may also have to pay CGT if you dispose of part of an asset or exchange one asset for another. In addition, CGT may be payable if you receive a capital sum of money from an asset without disposing of it, for example, if you receive compensation when an asset is damaged.