Last edited 07 Jul 2016

Capital gains tax

Contents

[edit] Overview

Capital Gains Tax (CGT) is levied on the profit that is made when something is sold, gifted, swapped or otherwise disposed of.

The following assets are liable to Capital Gains Tax:

  • Property. If it is not the main home (unless it is let out, used for business or larger than 5,000 square metres).
  • Shares that are not in a NISA, ISA or PEP.
  • Personal possessions that are worth more than £6,000 (apart from a personal car).
  • Business assets.
  • Overseas assets.

[edit] Property

Property that is liable to Capital Gains Tax includes:

  • Second homes.
  • Any rental properties.
  • Business premises.
  • Land, including agricultural land.

The selling of a main home will not generally be liable to Capital Gains Tax and may be eligible for Private Residence Relief.

[edit] Shares

The investments that are liable to Capital Gains Tax include:

  • Company stocks and shares.
  • Units in a unit trust.
  • Certain securities, debentures and bonds.

[edit] Personal possessions

The majority of personal possessions that are worth more than £6,000 are liable to Capital Gains Tax, including:

  • Jewellery.
  • Antiques.
  • Paintings.
  • Coins and stamps.
  • Possessions that are part of a set, such as matching vases (the threshold applies to the set as a whole).

[edit] Business assets

Numerous business assets are liable to Capital Gains Tax and typically include:

  • Buildings and land.
  • Fixtures and fittings.
  • Shares.
  • Plant and machinery.
  • Goodwill.
  • Registered trademarks.

[edit] Overseas assets

For residents in the UK, overseas assets are liable to Capital Gains Tax, including:

  • Holiday homes.
  • Shares in a foreign company.
  • Land abroad purchased for development.

[edit] When Capital Gains Tax is not required

Capital Gains Tax is only required on any gains which are in excess of the tax-free allowance, which for 2013-2014 is:

  • £10,900 for individuals.
  • £5,450 for trustees.

It is not normally necessary to pay Capital Gains Tax on gifts between husband and wife, civil partner or to charities. In addition, Capital Gains Tax on inheritance is typically only required when an asset is sold.

The following assets are not liable:

  • Personal car.
  • Personal possessions that are disposed of for less than £6,000.
  • Main home.
  • Any tax free investment savings accounts e.g. ISAs and PEPs.
  • Winnings from the lottery, betting or the pools.
  • UK government gilts and Premium Bonds.
  • Personal injury compensation.
  • Foreign currency for personal use.

[edit] Rates for Capital Gains Tax

The rates for Capital Gains Tax for 2013-14 are:

  • 18% and 28% for individuals (dependent on the total amount of taxable income).
  • 28% for trustees or for personal representatives of someone who has died.
  • 10% for sole traders or partnerships with gains qualifying for Entrepreneurs' Relief.

[edit] Reporting Capital Gains Tax

If Capital Gains Tax needs to be paid, HM Revenues and Customs (HMRC) will require notification through a tax return. This can be completed online or alternatively on paper.

[edit] Record keeping

It is necessary to maintain any records for at least one year after the Self Assessment deadline and businesses must maintain records for 5 years after the deadline.

[edit] Find out more

[edit] Related articles on Designing Buildings Wiki.

[edit] External references