Capital Gains Tax


Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

It’s the gain you make that’s taxed, not the amount of money you receive.

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.

When can we have a Taxable Gain on an Asset?

· selling it

· giving it away as a gift, or transferring it to someone else

· swapping it for something else

· getting compensation for it - like an insurance payout if it’s been lost or destroyed

What are the investments that you might have to pay CGT on?

· a second property or buy to let

· shares and funds, unless they're held in an Isa or pension

· the sale of a business

· valuables such as jewellery, antiques and art 

How losses from your CGT bill can help you

CGT is charged on your total gains each tax year. So if you make a profit when selling one item, but a loss when selling another, you can deduct the loss from the gain reducing the tax you owe, you are also allowed to carry forward any losses that haven't been used or which remain against gains in the current tax year.

Even if you don't owe any CGT, it's important to submit details of losses in your tax return to make it easier to offset them against a potential gain in future years. 

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.

However you can't carry forward any unused allowances, so if you don’t use them you lose them!

When is your payment due?

You can report capital gains to HMRC via the Report Capital Gains Tax online service from the government.

Alternatively, you can file a self-assessment tax return.

Under current rules, any CGT due on the sale of property is payable by 31 January after the end of the tax year in which the sale occurred, which will generally be the same date you file your tax return.

Depending on the date of the sale, this can give you between nine months and 18 months to pay. 

Note that under draft legislation proposed by the government, CGT on property sales will be payable within 30 days from April 2019 onwards.

Capital gains tax (CGT) and inheritance

Beware whatever you leave on death may avoid inheritance tax but maybe liable to Capital Gains Tax