How does capital gains tax work?
Capital gains tax can be expensive, but there are ways to reduce it  particularly if you see a wealth manager, says Rosemary Bigmore  Were all familiar with income tax. But capital gains tax, which is triggered when we sell an asset for a profit, is less well known. It can push up the amount of tax we pay  unless we take steps to reduce our bills. The tax, also known as CGT, is paid at different rates, depending on what you are selling and the amount you earn. There is one rate for selling property (except for your main home, which is exempt) and another for other assets. A basic rate taxpayer pays 10 per cent capital gains tax on assets and 18 per cent on property, while a higher rate taxpayer will pay 20 per cent on assets and 28 per cent on property. You can make 12,300 profit in any tax year before CGT kicks in. Bigger picture: capital gains tax is a complex subject and can affect anything from your business to savings and investments Credit: Getty  These rates can make disposing of an asset an expensive business. For example, if you sell shares worth 30,000 in one year and are a higher rate taxpayer, you would end up paying CGT of 28 per cent on 17,700 of the gain  giving you a bill of nearly 5,000. Reports in recent years have suggested that CGT rates should align with income tax, which would result in a sharp increase in CGT rates paid by most individuals. Not all assets attract CGT, but shares (outside an ISA), property that is not your main residence, and even gains from the sale of cryptocurrencies such as Bitcoin are all liable. On the other hand, lottery wins, vintage wine, classic cars and antique clocks are among items excluded from CGT liability. Speaking to a wealth manager could help you to reduce your bill. CGT is a complex area and it affects many more aspects of your life than you might think, from your business to your savings and investments, says John Fletcher, wealth director at Brewin Dolphin. He adds: There is no one-size-fits all solution to making your financial affairs efficient from a CGT perspective, so taking expert advice is important to safeguard your financial future.  Some of the ways a wealth manager can help with CGT include ensuring that as many of your assets as possible are in tax-efficient wrappers such as ISAs and pensions. As Fletcher explains, When assessing a clients CGT position we ensure they have maximised ISA and pension allowances for the current tax year, because gains made in these vehicles are free from CGT. We could then crystallize gains by selling shares or assets, then set those gains against the annual exemption. We could also consider Bed and ISA  this refers to the practice of selling assets outside an ISA then reinvesting them inside the tax-efficient wrapper.  Know the rules: assets can be passed between spouses and civil partners capital gains tax free Credit: Getty  A wealth adviser may also encourage you to crystallize gains by selling shares or assets and setting those gains against the annual exemption in years when you do not have any other assets to sell. They might also utilise loss relief, known as allowable losses, against gains made in the same tax year and deduct unused losses from previous tax years. You can also use a wife or civil partners capital gains tax allowance, as assets can be passed between spouses and civil partners CGT free. Whatever your financial goals, it pays to have a plan for the future, and Brewin Dolphin are in your corner. For a free, no-obligation financial resilience check with one of the Brewin Dolphin expert wealth advisers, visit brewin.co.uk/financial-future