You may have to pay CGT when you dispose of - meaning give away or sell - assets that have gone up in value.
Assets include shares and other investments (but not money in savings accounts), property and, for the self-employed or people working in partnership, your business premises if you own them. CGT is not payable on death and your own home is exempt. But selling a second home could mean you have some CGT to pay.
The CGT rate you pay depends on your top income tax rate and the length of time you have owned the asset. The maximum rates are 40 per cent for higher rate taxpayers and 23 per cent for basic rate payers.
It is easy to think that CGT is unlikely to apply to your investments when you cash them in. Indeed, the panicky state of the stock market means most shareholders are currently more concerned about their investments falling in value than realising a capital gain.
But if you own quite a lot of shares or unit trusts that are not sheltered in tax-free PEPs, it is worth bearing in mind that investors who hung on to their shares throughout 1987, the year of the Black Monday crash, generally did quite well.
Not all of a capital gain is taxable and the various reliefs mean that you can cut the gain substantially or perhaps wipe it out.
In some circumstances it is even possible to postpone the gain for an indefinite period, for example with business assets you sell, by rolling over the gain (reinvesting in more assets) in another business.
Everyone gets an annual CGT exemption of pounds 6,800. And indexation relief will reduce your capital gain for any period of ownership between 31 March 1982, and 5 April 1998. Indexation removes the element of gain due purely to inflation.
From 6 April 1998, this relief has been replaced by the new taper relief. Tax advisers believe that taper relief and other rule changes could bring more ordinary investors into the CGT net. The taper reduces the size of the taxable gain you are liable for, depending on the length of time - up to a maximum of 10 years - that you have owned the asset.
This relief is more generous for business assets (see the table), reducing taxable gains after 10 years to 25 per cent and the rate at which CGT is effectively charged on the whole gain from 40 per cent to 10 per cent for higher rate taxpayers; from 23 per cent to 5.75 per cent for basic rate payers. For non-business assets such as investments, the taper reduces the gain after 10 years to 60 per cent and the effective rate of tax to 24 per cent for higher rate payers; to13.8 per cent for basic rate payers.
For assets you owned before 17 March, the date of the Budget, you are allowed an extra year's worth of taper relief.
Because of the taper another relief, business retirement relief for those aged 50 or over, is being phased out by 2003.
For 1997/98 the maximum relief is 100 per cent of the first pounds 250,000 of capital gain and 50 per cent of the next pounds 750,000 for business assets owned for 10 years or more.
Each tax year until 5 April 2003, retirement relief will fall in stages to zero.
Keith Taylor, marketing manager of the Medical Insurance Agency, an independent financial adviser, says although retirement relief is going, there is a silver lining.
"Unlike retirement relief, taper relief applies regardless of age so in future if you sell business assets in your forties, depending on the number of years of ownership since 6 April, 1998, any gain can be reduced substantially."
Investors with shares can no longer use the classic CGT avoidance gambit known as "bed and breakfasting" as this was outlawed in the Budget.
"This involved selling shares one day to realise a gain within your annual exemption (pounds 6,800) and buying them back the following day," said Mr Taylor.
Now, this tactic will only pass muster if 30 days separate the sale and repurchase, but the longer period could prove counter-productive if share price rises significantly, so that it costs a lot more to buy them back. You can get round the 30-day rule by exchanging shares you own in, say, the Halifax for a Pep that holds Halifax shares (known as "bed and Pepping") or by exchanging your shares for unit or investment trust holdings, as technically the fund managers will own the shares.
Other CGT-saving ploys include transferring assets between husband and wife, as gifts to spouses do not trigger a taxable gain. For example, you might wish to do this if your spouse's annual exemption will not otherwise be used, but you have already used up your own exemption. There are snags with this, not least that the gift must not have any strings attached.
So your spouse must be able to do whatever they like with the asset. If he or she chooses to sell it immediately, the Inland Revenue may decide to tax you as if the transfer had not taken place.
Although highly complex CGT is not a tax that should keep the average investor awake at night. However, if you are concerned the gains you make will not be covered by the annual exemption and the other reliefs, get some professional advice.
Carole Slingsby is group finance editor of 'General Practitioner' newspaper and 'Medeconomics' magazine
Most bookshops sell tax guides aimed at the non-expert. Make sure any guide you buy has been updated for the 1998 Finance Act.
The Inland Revenue publishes free leaflets and booklets. Contact any tax enquiry office or tax office (in your phone book under Inland Revenue).
If you have Internet access, most Inland Revenue leaflets are available on www.inlandrevenue.gov.uk
Assets exempt from CGT include:
Your only or main home.
A home you own which has been occupied rent-free by a dependent relative prior to April 5 1998.
'Wasting' assets with a useful life of 50 years of less (eg a caravan).
Gifts of assets between spouses.
Gifts on death (although there may inheritance tax to pay)
Prizes including National Lottery and bettings winnings
Gilt-edged stock (government stock) and qualifying company loan stock.
Savings held in cash (eg in savings accounts).
Building society permanent interest bearing shares (PIBS).
Most cashbacks (ie incentives to take out mortgages).
Venture capital trust shares.
Investments gifted to charity.
Life insurance policy proceeds (unless policy was bought secondhand)
All National Savings products.
PEPs and from April 6 1999, individual savings accounts (ISAs).
Personal belongings (chattels) sold for less than pounds 6,000.