Capital Gains Tax is a tax charge applied to the gain from the sale of something you own. It’s calculated from the gain made, the increase in value of the sale price compared to the purchase price, for an asset held for more than one year. In the United Kingdom, Capital Gains Tax from the sale of residential properties is calculated differently from many other Capital Gains Taxes. For these sales, you are taxed 20% – 28% of the income gained from the sale of the property. These taxes do not apply to your home but apply when you sell buy-to-let properties, business premises, land, and inherited property. Essentially, these taxes apply when you sell any property that is not your home. If the property is a business asset, you may be eligible for tax relief, so ensure to seek advice from our professional tax accountant. If you are planning to sell an asset, it is important to understand the capital gains tax implications. Our team of experts can provide you with the advice and guidance you need to ensure that you are fully aware of your tax liabilities and any exemptions that may apply.
Frequently Asked Questions
Capital gains tax is a tax on gains made on the value of your assets (things that you own).
This can include the sale of shares, for example, or the sale of business assets or second
homes.
If you sold a property in the UK on or after 6 April 2020 you must report and pay any Capital
Gains Tax due on UK residential property within:
60 days of selling the property if the completion date was on or after 27 October
30 days of selling the property if the completion date was between 6 April and 26 October
You may have to pay interest and a penalty if you do not report and pay on time
It’s important to remember that even if you’re not living in the UK, you will still be liable for
Capital Gains Tax on UK residential property. If you’re not a resident in the UK, you must
report disposals of UK property or land even if you:
have no tax to pay on the disposal
have made a loss on the disposal
are registered for Self Assessment
Private residence relief refers to the tax break on property that ‘has been your only or main
residence throughout your ownership’. It means that when you sell your main home, no
Capital Gains Tax will be charged.You must have lived in your home as your only or main
residence at some point while you owned it.
If you’re married or in a civil partnership only one home per couple counts as your main
residence at any one time.
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 £6,000 and £3,000 for trusts for tax year 2023/24.
Previous years capital allowances tax-free allowances for previous years.
Limited companies pay Corporation Tax on profits from selling their assets. Companies do
not pay capital gains tax on the gains they make, instead they pay corporation tax.
Limited companies pay Corporation Tax on profits from selling their assets. Companies do
not pay capital gains tax on the gains they make, instead they pay corporation tax.
Some assets are exempt for capital gains purposes so you don’t pay CGT on:
● The disposal of an only or main residence.
● Transfers of assets between husband and wife or civil partners. Such transfers are
treated as being made at no gain/no loss.
● Most possessions whose value decreases over time.
● Non-wasting and business possessions where the disposal proceeds do not exceed
£6,000.
● Private and classic cars.
● Gifts to charity and certain amateur sports clubs.
● Saving certificates and premium bonds.
● Betting winnings and prizes including lottery.
● Compensation for damages for personal or professional injury.
● Some compensation pay-outs for mis-sold pensions.
● Life assurance policies in the hands of the original owner or beneficiaries.
● Winnings and damages for personal injury.
● Payments out of superannuation funds, annuities and annual payments under
covenant
● shares held in a personal equity plan and certain disposals of ‘employee shareholder
shares’
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