Capital Gains Tax is payable on any taxable gain realised by a UK taxpayer in any one tax year upon the sale of an asset. However, there are several exceptions and exemptions available to individuals and, in addition, individuals enjoy an annual tax free allowance, under which no capital gains tax (CGT) is payable.
Some assets are excluded from Capital Gains Tax including ISAs, PEPs or Government Guilts. An individual’s primary residence (usually their home) is currently exempt for the purposes of CGT in most cases and so any gain realised upon its disposal will not usually attract a CGT charge. However, if your home is let out or you are using part of it for business purposes then you may have to pay CGT on all or part of any gain realised.
In any event, even when Capital Gains Tax is payable, it’s important to realise that capital gains tax is payable on the gain after allowing for the costs of the property purchase, the costs of any improvements and the subsequent sale of the asset. Inflation must also be taken into account when calculating the real terms gain. It’s well worth taking professional advice as each case should be judged on its own merits.
Capital Gains Tax is payable if you dispose of an asset that is subject to CGT and so merely giving away your asset or trying to sell it for less than it is worth in order to reduce your CGT liability is unlikely reduce your CGT liability! The tax man will look at the asset’s ‘market value’. That said, gifts to a spouse or charity are usually excluded from Capital Gains Tax.
If you own more than one property (e.g. a holiday home or buy to let) you must elect one as your primary residence for tax purposes. In such cases, the sale of your other premises will be deemed chargeable for CGT purposes when a gain is realised.
The current annual Capital Gains Tax allowance for an UK tax payer for 2016-17 is £11,000. This has been the same since 2015. Remember, if you own an asset jointly, you may well have two allowances to set against the gain in any tax year. Furthermore, if you have lost money on the sale of taxable assets in the past you may want to set these losses against current gains. Check with HMRC for further details.
If you pay higher rate Income Tax then you’ll pay 28% CGT on your gains from residential property and 20% CGT on your gains from other chargeable assets.
If you are a basic rate taxpayer then it’s likely you will pay Capital Gains Tax at 18% on residential property and 10% on other gains. However, if your gains are sufficient to put you into a higher rate income tax bracket when added to your taxable income, your CGT rate may increase.
Related articles:
Download our Free First Time Buyers Guide
Recent posts
Recent research from Halifax has revealed the most sought-after locations for first time buyers in Britain.
The data which was taken from the Halifax House Price Index looked at areas outside of London where those looking to purchase their first property were buying. Despite high property prices and increased rates, these first time buyer hotspots have remained popular.
How can I look after my mental health?
5 days ago
Taking care of your mental health means looking after your emotional, psychological, and social wellbeing. There are several ways we can practice self-care that will help to improve our physical and mental health. This can help to reduce our risk of illness, manage stress, and boost our energy levels!
First Time Buyer to do List
8 days ago
Buying your first home is very exciting but it can also be very daunting which is why we have set out a “to do list” to help you get started.
Bank of England Holds Base Rate at 5%
22 days ago
With UK inflation remaining at 2.2% which is slightly above the Bank of England’s 2% target, the decision was made on Thursday 19th September to keep the base rate at 5%.
Virgin Money and Hive Energy introduce new "green" mortgage product called Retrofit Boost Mortgage with the aim to help homeowners improve the energy efficiency of their home by offering cashback between £3,000 and £15,000
According to recent findings by LV= where 4,000 UK adults were surveyed, mortgage holders said that were likely to consider equity release to free up some money to take care of expenditures in later life.
A mortgage market rate war
9 Aug 2024
Following the recent decision by the Bank of England’s Monetary Policy Committee to cut the base rate from 5.25% to 5% (the first reduction seen in over four years), we have seen lots of lenders reducing their rates to remain competitive.
August in Bloom: Gardening Tips
7 Aug 2024
More information
Trusted by
