What is capital gain tax.
Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.
It’s the gain you make that’s taxed, not the amount of money you receive.
Example: You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).
Disposing of an asset
Disposing of an asset includes:
1-selling it
2-giving it away as a gift, or transferring it to someone else
3-swapping it for something else
4-getting compensation for it – like an insurance pay out if it’s been lost or destroyed
You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount).
The Capital Gains tax-free allowance is:
- £12,300
- £6,150 for trusts
Your spouse or civil partner
You do not pay Capital Gains Tax on assets you give or sell to your husband, wife or civil partner, unless:
- you separated and did not live togetherat all in that tax year
- you gave them goods for their business to sell on
Gifts to charity
You do not have to pay Capital Gains Tax 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
Work out your gain using the amount the charity actually pays you, rather than the value of the asset
Rates
If the capital gain is within the basic Income Tax band you’ll pay 10% on your gains (or 18% on residential property). You’ll pay 20% (or 28% on the residential property) on any amount above the basic tax rate.