Basic taxation

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5. Capital gains tax (CGT)

The annual exemption of £9,600 for the 2008-2009 tax year is the amount of capital gains you can make before you pay CGT at your top rate of income tax.

Gifts between spouses are exempt so the tax efficient couple may consider sharing assets.

In practice, most investors manage to avoid capital gains tax without making any special arrangements, simply because their liability regularly falls within the annual CGT exemption. Even if you have a very large portfolio and you are an active investor, you may still be able to avoid or reduce your liability but this will require some careful planning.

Capital gains tax is payable when you sell an asset and make a 'chargeable gain', that is, where the value of an asset you sell has increased since you acquired it. Remember, CGT is not charged on the asset itself but on its gain in value.

Investors who have received free "windfall" shares from demutualised building societies and life assurance companies should bear in mind that the proceeds of any sales will be classed as a pure capital gain unless they are held in a tax exempt investment such as an Individual Savings Account (ISA).

1. Your tax breaks courtesy of the government 2. Keep it legal 3. Income tax - first principles 4. Income tax - keeping it in the family 5. Capital gains tax (CGT) 6. How to avoid CGT on your share portfolio 7. Inheritance tax (IHT) planning 8. The most popular tax efficient investments 9. The tax treatment of collective funds 10. Tax efficient but may be very risky 11. Self assessment - who needs it? 12. Self assessment - key dates 13. Do you need an adviser? 14. Conclusion