Capital Gains Tax (CGT) is a tax levied on the profit arising when you sell an asset, give it away, exchange it or otherwise dispose of it. It could also apply if you receive insurance when an item is lost or destroyed.
CGT is charged on the profit that you make, which is defined as “the increase in value over the time period you have owned the asset” or “the comparison between the sale proceeds (the value of the asset at the time you dispose/sell it) and the original cost of the asset”. In some cases, a market value may be substituted for the sale proceeds or the original cost; especially if connected parties are involved.
Generally speaking, assets which are subject to CGT include residential property, commercial property, land, company stocks and shares and potentially other personal possessions.
There are a number of occasions when CGT is not levied such as:
- The gift of assets between spouses and civil partners
- Gifting assets to UK registered charity
- The sale (or gift) of cars
- Disposals of shares held in ISAs, UK government gilts, NS&I Premium Bonds, betting or lottery winnings
- Selling/gifting personal possessions (chattels) valued at less than £6,000 each
Your home is not normally subject to CGT if it has been your only home throughout your entire period of ownership and the land it comes with does not exceed 1.236 acres.
Who pays CGT?
UK residents are generally subject to UK CGT on assets held anywhere in the world. Assets held overseas may also be taxed in the country where they are situated (although a Double Tax Agreement in place between the UK and the other country could mitigate double taxation).
Non-UK residents are currently only subject to UK CGT on disposals of all UK land & property.
I’ve disposed of a chargeable asset – What do I need to tell HMRC?
Disposals need to be reported on a Self-Assessment Tax Return if the gains are more than the Annual Exemption (£3,000 for 2024/25) or the total proceeds exceed £50,000 in the tax year.
The Tax Return and any CGT payable is normally due by 31 January after the tax year of disposal. However, if you are disposing of a UK residential property, a CGT Property Return needs submitting within 60 days of completion, along with full payment of the CGT due (Non-UK residents must report disposals of all UK land and property in this way, even if no gain arises).
For other disposals, if you don’t normally file Self-Assessment Tax Returns, you may be able to use the HMRC real time CGT service to report your gains. See https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-have-other-capital-gains-to-report
How much CGT will I have to pay?
The amount of CGT payable will depend on the level of your income and the type of asset sold. The CGT rates for 2024/25 are:
- Residential property & carried interest: 18% or 24%
- Disposals of business assets qualifying for Business Asset Disposal Relief: 10%
- All other assets: 10% or 20%
What if I make a loss?
Capital losses are automatically offset against other capital gains if they are realised in the same tax year with the balance of any unused capital losses being carried forward to set against future gains.
In some circumstances – such as the disposal of unquoted shares – some qualifying losses can be set against income, but only when certain criteria are met.
CGT is a complicated area and this blog is only a summary of some of the key points. You must take specific advice for your personal circumstances.
If you are unsure whether your transaction is subject to CGT or if you need assistance with your CGT reporting obligations, contact our friendly team on 01223 810100 to see how we can help you.
