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Wednesday, 3 October 2023

Capital Gains Tax

Capital Gains Tax 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.

When do I have to pay Capital Gains Tax?

You may have to pay Capital Gains Tax if, for example, you:

  • 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 Capital Gains Tax 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 Capital Gains Tax
  • you can't give assets to your children or others or sell assets cheaply without having to consider Capital Gains Tax
  • if you make a loss you may be able to make a claim for that loss and deduct it from other gains, but only if the asset normally attracts Capital Gains Tax - for example 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 Capital Gains Tax to pay at that time - however if an asset is later disposed of by a beneficiary, any Capital Gains Tax 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

How Capital Gains Tax is worked out

Capital Gains Tax is worked out for each tax year (which runs from 6 April one year to 5 April the following year). It is charged on the total of your taxable gains, after taking into account:

  • certain costs and reliefs that can reduce or defer gains
  • allowable losses you have made on assets to which Capital Gains Tax normally applies
  • the Annual Exempt (tax-free) Amount - this is £10,600 for every individual in the tax year 2011-12

Capital Gains Tax rate

For 2011-12 the following Capital Gains Tax rates apply:

  • 18 per cent and 28 per cent for individuals (the rate used will depend on the amount of their total taxable income and gains)
  • 28 per cent for trustees or personal representatives
  • 10 per cent for gains qualifying for Entrepreneurs' Relief

How you pay Capital Gains Tax

You pay Capital Gains Tax through the Self Assessment system. Use the link below to find out more about reporting a gain or loss and getting a Self Assessment tax return.

If you've received a Self Assessment tax return, follow the guidance to decide if you need to fill in the capital gains pages as part of that return. The return tells you how to obtain these pages if you need them.

If you don't usually complete a tax return, but wish to report gains or losses, follow the link below to find out more.

Provided by HM Revenue and Customs

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