The Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that has increased in its value.
It’s the profit you make that’s taxed, not the amount of money you receive. For example, if you bought a painting for £5,000 and sold it later for £25,000, you’ve made a gain of £20,000 (£25,000 minus £5,000).
Some assets are tax-free. You also do not have to pay Capital Gains Tax if all your gains in a year are under your tax-free allowance.
If you sold a UK residential property on or after 6 April 2020 and you have tax on gains to pay, you can report and pay using a Capital Gains Tax on UK property account.
Disposing of an asset includes:
You pay Capital Gains Tax on the gain when you sell (or ‘dispose of’):
These are known as ‘chargeable assets’.
Ie. If you sell or give away cryptoassets (like cryptocurrency or bitcoin) you should check if you have to pay Capital Gains Tax.
Depending on the asset, you may be able to reduce any tax you pay by claiming a relief.
If you dispose of an asset you jointly own with someone else, you have to pay Capital Gains Tax on your share of the gain.
You only have to pay Capital Gains Tax on your total gains above an annual tax-free allowance.
You do not usually pay tax on gifts to your husband, wife, civil partner or a charity.
You do not pay Capital Gains Tax on certain assets, including any gains you make from:
When you inherit an asset, Inheritance Tax is usually paid by the estate of the person who’s died. You only have to work out if you need to pay Capital Gains Tax if you later dispose of the asset.
You may have to pay Capital Gains Tax even if your asset is overseas.
There are special rules if you’re a UK resident but your permanent home is not in the UK.
You have to pay tax on gains you make on property and land in the UK even if you’re non-resident for tax purposes. You do not pay Capital Gains Tax on other UK assets, for example shares in UK companies, unless you return to the UK within 5 years of leaving.
You can report losses on a chargeable asset to HM Revenue and Customs (HMRC) to reduce your total taxable gains.
Losses used in this way are called ‘allowable losses’.
When you report a loss, the amount is deducted from the gains you made in the same tax year.
If your total taxable gain is still above the tax-free allowance, you can deduct unused losses from previous tax years. If they reduce your gain to the tax-free allowance, you can carry forward the remaining losses to a future tax year.
Claim for your loss by including it on your tax return. If you’ve never made a gain and are not registered for Self Assessment, you can write to HMRC instead.
You do not have to report losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset.
There’s an exception for losses made before 5 April 1996, which you can still claim for. You must deduct these after any more recent losses.
You usually do not pay Capital Gains Tax on assets you give or sell to your spouse or civil partner. You cannot claim losses against these assets.
You cannot deduct a loss from giving, selling or disposing of an asset to a family member unless you’re offsetting a gain from the same person.
This also applies to ‘connected people’ like business partners.
HMRC defines connected people as including:
You can claim losses on assets that you still own if they become worthless or of ‘negligible value’.
HMRC has guidance on how to make a negligible value claim.
HMRC has guidance on the special rules for losses:
Check https://www.gov.uk/capital-gains-tax for more information.