Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is a tax on capital 'gains'. If when you sell or give away an asset it has increased in value, you may be taxable on the 'gain' (profit). This doesn't apply when you sell personal belongings worth £6,000 or less or, in most cases, your main home.

When Do I Have To Pay CGT?

CGT may be payable if, for example, you:

    • Sell, give away, exchange or otherwise dispose of (cease to own) an asset or part of an asset
    • Receive money from an asset - for example compensation for a damaged asset


There are exemptions to CGT and include:

    • Your Car
    • Your Main Home - provided certain conditions are met
    • ISAs or PEPs
    • UK Government Gilts (bonds)
    • Personal Belongings worth £6,000 or less when you sell them
    • Betting, lottery or pools winnings
    • Money which forms part of your income for income tax purposes


Additional points to consider:

    • If you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
    • You can't give assets to your children or others or sell them assets cheaply without having to consider CGT
    • If you make a loss you may be able to make a claim for that loss and deduct it from other gains, but only if the asset normally attracts CGT - for example you cannot set a loss on selling your car against gains from disposing of other assets
    • If someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time - however if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal


How CGT Is Calculated

CGT is worked out for each tax year (which runs from 6 April one year to 5 April the following year). It is charged on the total of your taxable gains, after taking into account:

    • Certain costs and reliefs that can reduce or defer gains
    • Allowable losses you have made on assets to which normally CGT applies
    • The annual exempt (tax-free) amount - this is £10,600 for every individual in 2011-2012


The Rate Of CGT

Individuals up to basic rate = 18%
Individuals above basic rate = 28%


For 2010-11 there is a single rate of Capital Gains Tax of 18 per cent for individuals, trustees and personal representatives on taxable gains

Last updated: 22/04/2010 14:28:34