CGT is a tax on capital "gains". If when you sell or give away an asset it has increased in value, you may be taxable on the gain (profit). This doesn`t apply when you sell personal belongings worth £6,000 or less or, in most cases, your main home.
If you have sold, or you are thinking of selling an asset which you think may be liable to CGT, there are a number of questions that you must ask. We have a separate section for each of these - please use the links below :
sell, give away, exchange or otherwise dispose of (cease to own) an asset or part of an asset
receive money from an asset - for example compensation for a damaged asset
You don't have to pay CGT on:
your car
your main home, provided certain conditions are met
ISAs or PEPs
UK Government gilts (bonds)
personal belongings worth £6,000 or less when you sell them
betting, lottery or pools winnings
money which forms part of your income for income tax purposes
These are some points to bear in mind:
if you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
you can't give assets to your children or others or sell them assets cheaply without having to consider CGT
if you make a loss you may be able to make a claim to deduct that loss from other gains; but only if the asset normally attracts CGT - thus you cannot set a loss on selling your car against gains from disposing of other assets
if someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time. However, if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal.
Section: How is CGT worked out ?
The net gain is the proceeds received for the asset minus the purchase price and the cost of any capital improvements to the asset during ownership. In
certain cases an entrepreneurs' relief is due on the first £10 million* of gains qualifying for relief and they will instead be taxed at 10%. This
is a lifetime allowance and claims can be made on more than one occasion up to the lifetime limit. The relief may be due on gains made by individuals
on the disposal of:
All or part of a trading business they carry on alone or in partnership;
Assets of the individual or partnerships trading business after it ceases;
Shares in (and securities of) their personal trading company (or holding company of a trading group);
Assets owned by them and used by their personal trading company (or group) or partnership.
For assets sold prior to 6 April 2008 capital gains were charged depending upon your total income liability for the year.
*This figure is for disposals from 6 April 2011. From 23 June 2010 to 5 April 2011 the figure was £5 million; from 6 April 2010 to 22 June 2010
the figure was £2 million and prior to that the figure was £1 Million.
Section: At what tax rate is CGT payable ?
Your total taxable gains are added together and where they exceed the annual exemption for the year the gains are then charged to CGT.
From 6 April 2008 capital gains have been charged at a set rate of 18% of the net gain. However where disposals occurred on or after 23 June 2010, any
gains that fall within the individuals, unused basic rate band are charged at 18% and anything over is taxed at 28% thereafter. Gains realised prior to
23 June 2010 were taxed at a flat rate of 18% irrespective of the level of other income.
The only exception is where an individual qualifies for the entrepreneur´s relief in which case the gain or part of the gain could be charged at
10%.
