Capital gains tax is the tax you pay on the profit (gain) you’ve made on an asset between the time you acquire it and dispose of it. When you dispose of your asset, you might have capital gains tax to pay. Most of the time assets are disposed of by selling them but it is also possible to dispose of them by giving them away, losing them or destroying them. We explain the nuts and bolts for you here.
Published on 28 Jan 20224 minute read
Written by Frances Bruce
Everyone receives a capital gains tax allowance each tax year, known as an annual exempt amount. The exemption is currently £12,300 (set to stay until 2026). Capital gains tax is calculated according to asset type and your income band:
|
Capital gains tax rate -Basic-rate taxpayers |
Capital gains tax rate –Higher-rate taxpayers |
Property other than your home |
18% |
28% |
Other assets |
10% |
20% |
Your capital gains tax allowance cannot be carried backwards or forwards into a different tax year so if you don’t use your annual capital gains tax exemption each tax year, you lose it.
You could be liable for capital gains tax when you dispose of almost any asset ranging from personal property, such as antiques and valuable pieces (including sets), to shares.
The good news is there’s no capital gains tax owing on stocks and shares held inside ISAs and pension investments such as those held in SIPPs (Self-invested Personal Pensions).
There are strict rules around disposing of household assets such as jewellery, antiques and sets (known as ‘chattels’). You’ll usually pay capital gains tax if the gain is over £6,000. There is no capital gains tax on household items selling for less than that.
As well as not paying capital gains tax on your ISAs or pension investments, assets exempt from capital gains tax include:
Capital gains tax is charged on all the gains you make in one year. If you make a loss on one asset but a gain on another, you can subtract the loss from the gain.
No, you don’t pay capital gains tax if you transfer assets to your husband, wife or civil partner - and you can’t claim losses for that asset after transfer.
You usually calculate gains on your portion of the asset - and you can pool your allowances and potentially give yourselves a £24,600 tax-free threshold.
No. Your assets are exempt from capital gains tax on death. There might be inheritance tax to pay though. Capital gains tax could apply when the asset is disposed of by executors or the people you have left them to - if there is a gain between the date of death and when they are sold.
We offer a stocks and shares ISA and our Best SIPP*, which allow you to invest without having to pay capital gains tax in the future. You can also give us a call on 020 7189 2400 and our friendly team can answer any questions you have about tax-efficient investing.
The value of an investment may go down as well as up, and you may get back less than you originally invested.
This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact a financial adviser.
Prevailing tax rates and reliefs depend on your individual circumstances and are subject to change.
* SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you, then a SIPP might not be right for you. Please note, other taxes may apply when taking your pension income.