A capital gain is the profit you make by selling assets for more than you paid for them. Any gains above this £8,800 are added to your income and taxed at 40 per cent if your taxable income plus gains exceed £33,300, 20 per cent below £33,300 and only 10 per cent below £2,150.

For gains made after April 1998 a taper relief system reduces the chargeable gain for assets held for more than three years.

Besides the capital gains tax allowance, look out for these other exemptions:

The profit you make when you sell your primary residence – the house you consider to be your main home – is free of CGT. If you've used it for business, you may find you're liable to pay some tax on the gain.

You are also entitled to a chattels exemption in addition to your CGT exemption. This allows you to sell individual items or a set of items, furniture or paintings for example, up to the value of £6,000 without any CGT being due. If you're a dealer, you won't be entitled to either the chattels exemption or the annual exemption.

Some investments are free of capital gains tax. They include government stocks (gilts), some National Savings & Investments products, friendly society investments and investments held in an Individual Savings Account.

Next: What about tax on investments?