Capital Gains Tax
Most things we buy, we rarely sell for more than we paid e.g. cars, jewellery, clothes etc. don’t normally qualify for Capital Gains Tax (CGT) as we rarely make money on them. If you do sell items for more than you paid for them, then if you make more money in any year than the CGT allowance (currently £6,000 in 2023/24 for Individuals, personal representatives and trustees for disabled people.
Capital Gains Tax (CGT) is payable when you make a gain on an investment i.e. you sell it for more than you paid for it. Each tax tear there is the existance of the 'Annual Exempt Amount' where Capital Gains Tax is payable where overall gains for the tax year (after deducting any losses and applying any reliefs) are above this amount.
You do not pay CGT on your home assuming it is your sole or main residence. If you have more than one property then you need to elect which home is your main residence and you will pay CGT on the other properties.
An important consideration is that CGT is only payable when you actually sell an asset. Assets can have a CGT liability attached to them because if you sell them they will attract CGT. As you get an annual CGT allowance, if you restrict your sales in each year within this allowance you will avoid paying any CGT. This is possible to do with most unitised investments (e.g. shares, unit trusts etc.) however it is much harder with items such as property as you can’t really sell half a house.
Investments held under an Individual Savings Account (ISAs) or in a pension are not liable to CGT which is one of the main attractions of these plans (often referred to as tax wrappers).
CGT is calculated at a different tax rate depending on the total amount of taxable income. The following are some of the rates which could be applicable.
- 10% and 20% tax rates for individuals (not including residential property and carried interest)
- 18% and 28% tax rates for individuals for residential property and carried interest
- 20% for trustees of for personal representative of someone who has died (not including residential property)
- 28% for trustees or for personal representative of someone who has died for disposals of residential property
- and other conditions which may apply depending on your circumstances.
TAX TREATMENT IS BASED ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN THE FUTURE.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX PLANNING.