How to Calculate Taper Relief

Taper relief can reduce your U.K. capital gains taxes on property,

Taper relief plays an important role in determining capital gains taxes in the United Kingdom. It can substantially reduce the amount you owe after selling an asset by limiting the tax rate based on how long you have owned the asset and whether it is a business asset or a personal one.

Instructions

1. Determine the number of years you have owned the asset being charged a capital gains tax. The longer you have owned the asset, the higher the percentage of taper relief. Owning the asset for one year provides up to 50 percent taper relief, while two or more years of ownership allows for up to 75 percent taper relief.

2. Specify whether the asset is of a business nature or a nonbusiness nature. These two categories are calculated differently, and business assets are eligible for significantly more taper relief. The maximum taper relief for a nonbusiness asset is 40 percent, as opposed to 75 percent of a business-related asset.

3. Calculate the taper relief for your specific asset, depending on your asset's age, business or nonbusiness application and tax rate, according to HMRC.gov.uk. If you are being taxed at a 20 percent rate and you have a business asset that you have owned for 10 years, it would be subject to a 5 percent tax rate, or a taper relief of 75 percent. A nonbusiness asset held for 10 years would be subject to only a 12 percent tax rate, suggests FairInvestment.co.uk.

References

• Fair Investment: Taper Relief
• HM Revenue and Customs: Taper Relief