Capital Gains Tax: Key Info – 21/06/2021

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Capital Gains Tax (CGT) is a tax on the profit when you sell (or ‘dispose of’*) an asset that has increased in value – it is important to note that it is not the amount of money you receive that’s taxed but what you gain.

*’Disposing of’ an asset includes:

Selling it
Giving it away as a gift
Swapping it for something else
Getting compensation for it

You pay CGT on the gain when you sell:

Most personal possessions worth £6,000 or more
Property that is not your main home
Your main home if you’ve let it out, used it for business or it’s very large
Shares that are bot in an ISA or PEP
Business assets

CGT is only paid on your total gains above an annual tax-free allowance; the Capital Gains tax-free allowance is:

£12,300
£6,150 for trusts

You also do not pay CGT on:

ISAs or PEPs
UK government gilts and Premium Bonds
Betting, lottery, or pools winnings

CGT is not paid on on assets you sell/give to your husband, wife or civil partner unless:

You separated and did not live together at all in the tax year
You gave them goods for their business to sell on

Your spouse or civil partner may have to pay tax on any gain if they later dispose of the asset.

You do not have to pay CGT on assets you give away to charity. You may have to pay if you sell an asset to charity for both:

More than you paid for it
Less than market value

You will need to report your gains in your tax return if:

The total amount you sold the assets for was more than 4x your allowance
You are registered for Self-Assessment

You pay a different rate of tax on gains from residential property than you do on other assets.

If you are a higher or additional rate taxpayer, you’ll pay:

28% on your gains from residential property
20% on your gains from other chargeable assets

If you are a basic rate taxpayer, 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:

Work out how much taxable income you have
Work out your total taxable gains
Deduct your tax-free allowance from your total taxable gains
Add this amount to your taxable income
If this amount is within the basic Income Tax Band, you’ll pay 10% on your gains and 18% on residential property. You’ll pay 20% on your gains and 28% on residential property on any amount above the basic tax rate

You can report losses on a chargeable asset to HMRC to reduce your total taxable gains.

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