What is Capital Gains Tax?

What is Capital Gains Tax?

Capital Gains Tax (CGT) is due when you sell, transfer, gift or exchange all or part of an asset such as property and investment. CGT is paid by both UK and non- UK residents. It may also be due when a UK resident disposes of an overseas asset. Since the 2020/2021 tax year the annual exemption for an individual has been £12,300 however, since the Autumn Finance Bill 2022 this has been cut to £6,000 from the 2023/2024 financial year and will reduce again in the 2024/2025 tax year to £3,000, where it will remain until further notice.

By reducing the exemptions, the Chancellor of the Exchequer is expecting to receive up to £440 million pounds in Capital Gains Tax in the 2027/2028 tax year.  

What rate of tax will I pay on any Capital Gain?

The Capital Gains Tax you use depends on the total amount of your taxable income. Individuals who are basic rate taxpayers (20%) will pay 10% on any gains over the exemption whereas those who are higher or additional rate taxpayers (40% and 45%) pay 20% on gains above the exemption.  You can offset any losses from the sale of an asset in order to increase your Capital Gain allowance for the year.

On what assets will I pay Capital Gains Tax on?

You will pay Capital Gains Tax on any of the following which you own: Shares, Funds, Investment Trusts, Land, Investment/Second Properties and other possessions such as Art and Jewellery which is worth at least £6,000.

You do not pay CGT on your family home or most personal possessions, UK Government Bonds, any investments which are held within your ISA or Pension, Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs)

If you feel that there is a possibility that you have an issue with Capital Gains Tax and would like to look at the most efficient way to combat it, please contact us.