We provide Capital Gains Tax (CGT) advice and help you plan your available reliefs and taxes. CGT is payable when you sell (or dispose of) an asset, such as a business, a property or shares and make money on the sale. The amount you pay depends on your income and the asset.
CGT is payable on the gain when you sell or dispose of your chargeable assets, such as:
- Most personal possessions worth £6,000 or more (apart from your car),
- Property that is not your main home,
- Your main home if you have let it out, used it for business or it is very large,
- Shares that are not in an ISA or PEP,
- Business assets.
If you dispose of an asset you jointly own with someone else, you have to pay CGT on your share of the gain.
If you sell or give away cryptoassets (i.e. cryptocurrency or bitcoin), you may have to pay CGT (you can check here).
When you inherit an asset, Inheritance Tax is usually paid by the estate of the person who has died. However, you will have to work out whether you need to pay CGT if you later dispose of the asset.
If you sold your residential property in the UK before 6 April 2020, you can report the gain using the Capital Gains Tax service or in your next Self Assessment tax return.
From 6 April 2020, any UK resident disposing of a UK residential property and any non-UK resident disposing of both UK residential and non-residential property must report and pay the Capital Gains Tax due within 30 days from completion. You must continue to include these gains in your Self Assessment tax return, if you send one. You may incur a penalty as well as interest on the sum owed, if you do not tell HMRC within the time limit.
The Annual Exempt Amount
If your taxable gains are above your allowance, you will need to report and pay CGT. The current Capital Gains tax-free allowance is: £12,300 (£6,150 for trusts). However, you still need to report your gains in your tax return if both of the following apply:
- The total amount you sold the assets for was more than 4 times your allowance,
- You are registered for Self Assessment.
Capital Gains Tax Rates
The rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets.
Taxable income = Income - Personal Allowance - Any other Income Tax reliefs you are entitled to
If you pay basic rate Income Tax:
If your taxable income is within the basic Income Tax band, you will pay 18% on your gains from residential property and 10% on your gains from other chargeable assets.
Higher or additional rate taxpayer:
If you are a higher or additional rate taxpayer, you will pay 28% on your gains from residential property and 20% on your gains from other chargeable assets.
Trustee or business:
Trustees or personal representatives of someone who has died will pay 28% on their gains from residential property and 20% on the gains from other chargeable assets.
Private Residence Relief
When you sell or dispose of your home, you will automatically get a tax relief called Private Residence Relief if all of the following apply:
- You have one home and have lived in it as your main home for all the time you have owned it,
- You have not let part of it out (this does not include having a lodger),
- You have not used part of it for business only,
- The grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total,
- You did not buy it just to make a gain.
Married couples and civil partners can only count one property as their main home at any one time. The rules are different if you sell property that is not your home or if you live abroad.
You may have to pay CGT if you have let out your home. How much you pay depends on how long you lived in it (having a lodger does not count as letting out your home). You will pay tax on your chargeable gain:
Chargeable gain = Your gain - Any Private Residence Relief you are eligible for
You get full relief for:
- The years you lived in the home,
- The last 9 months you owned the home (even if you were not living there at the time).
If you sold the property between 6 April 2014 and 6 April 2020, you get relief for the last 18 months you owned it. If you only own one home and you are disabled, in long-term residential care or sold the property before 6 April 2014 you get full relief for the last 36 months you owned it.
If you lived in your home at the same time as your tenants, you may qualify for Letting Relief on gains you make when you sell the property. You can get the lowest of the following:
- The same amount you got in Private Residence Relief,
- The same amount as the chargeable gain you made while letting out part of your home
Letting Relief does not cover any proportion of the chargeable gain you make while your home is empty.
You cannot deduct certain costs, like interest on a loan to buy your property. However, you can deduct costs of buying, selling or improving your property from your gain, such as:
- Estate agents and solicitors fees,
- Costs of improvement works (normal maintenance costs like decorating do not count).
Accountant’s fees are allowable only to the extent that they relate to the ascertainment of market value of the assets or to any apportionment for the purposes of the computation. Otherwise, fees for the computation of liability are not allowable.
There are special rules for calculating your gain if you sell a lease or your home is compulsorily purchased.
You may have to pay CGT even if your asset is overseas. There are special rules if you are a UK resident but not domiciled and claim the remittance basis.
Gifts or Assets to Your Spouse or Civil Partner
You do not pay CGT on assets you give or sell to your husband, wife or civil partner, unless:
- You separated and did not live together at all in that tax year,
- You gave them goods for their business to sell on.
Gifts to Charity
You do not have to pay CGT on land, property or shares you give to charity. You may have to pay if you sell them for more than they cost you, but less than their market value. Work out your gain using the amount the charity actually pays you, rather than the value of the asset.
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