Capital gains on a second business

[Hungry]

Hi

Its my first post here so apologies if I make any mistakes. I am going to be trawling through this site over the next few days to try and absorb as much as I can but I wanted to start a thread that would be a specific answer to my question.

Basically I graduated university in 2010 and have been working for a just over a year now. I am happy at my job and am earning a fairly decent wage for my age (<25K) but this doesn't transcribe to what I would like to take home after tax, loan repayments etc so I know I need to do something extra- if not for the money then for the experience. I am tinkering with different business ideas but need to read up on the requirements as far as tax goes.

I am intrigued by the £10600 capital gains tax allowance we can receive here in the UK- am I missing something here? Does that mean any gains I make from selling things I own is tax free up until I make a total of £10k? Is this only if I don't have a job already?

Does this mean if I was to buy a car for £2000 and sell it for £2500 that £500 gain would be tax free? If I buy 20 cars for £2000 over the year and sell them all for £2500 each making £10'000 would that be my money in my bank tax free?

I am sure this cannot be right which is why I wanted to post it online to try and get an answer from a wider audience. I underestand that I will need to follow up the advice as all it is is advice but hopeully it will guide me in the right direction.

Thanks in advance.

[mullet]

Does that mean any gains I make from selling things I own is tax free up until I make a total of £10k? Is this only if I don't have a job already?

In broad terms, yes. But what you sell has to be a capital asset. And if it is a chattel (tangible moveable property) then special rules apply. The £10,600 annual exempt amount applies to all ... whether employed or not, whether earning £0, £10,000 or £10M.

Does this mean if I was to buy a car for £2000 and sell it for £2500 that £500 gain would be tax free? If I buy 20 cars for £2000 over the year and sell them all for £2500 each making £10000 would that be my money in my bank tax free?

Cars are specifically exempt from the capital gains tax regime. In simple terms this is because they are usually depreciating assets and this legislation prevents people from claiming capital losses on cars (and other machinery). The situation that you describe, with a series of purchases/sales and a profit motive, is typical of trading activity. Such profits are assessable as income, not within the capital gains regime.

I am sure this cannot be right

You are correct, it isn't right - but there is no problem in asking and there is no such thing as a stupid question. You have come to the right place.