Capital gains tax: how to determine if you have to pay – could you be exempt? | Personal finance | Finance

Capital gains tax is a tax paid on profits when someone sells or “disposes” of something that has increased in value since they bought it. Tax is paid on the amount earned, not on the amount of money a person receives. An example used on GOV.CO.UK is if a person buys a painting for £5,000 and later resells it for £25,000. This means that the person has made a gain of £20,000 and will pay tax on those capital gains, charged at 10% for basic rate taxpayers.

Capital gains are charged at 20% for higher and additional rate taxpayers, or 18% and 28% respectively on residential properties.

For basic rate taxpayers, it will depend on the gain. If the gain is in the basic tax bracket, they will pay 10%, and if it is higher, they will pay 20%.

In the official rules, disposing of an asset includes selling it, giving it as a gift or transferring it to someone else, exchanging it for something else, or getting compensation for it – such as insurance payout. it has been lost or destroyed.

Capital gains are paid on “taxable assets” which include:

Personal property worth £6,000 (but not a person’s car)

A property that is not their principal residence, the principal residence if it is rented, for business use or very large in size

All stocks that are not in an ISA or PEP

Business assets.

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It can also cover crypto assets such as cryptocurrency or bitcoin.

People may also pay capital gains tax on overseas assets, as there are special rules if a person is a UK resident but their permanent home is not in the UK. UK.

Everyone gets a tax-free annual allowance of £12,300 and £6,150 for trusts each tax year, meaning they won’t have to pay capital gains on gains below this amount.

The tax year runs from April 6 to April 5 of the following year.


The legal deadline for paying capital gains tax is January 31 following the tax year of disposal. Government guidelines state that people will have to keep all their records of the disposal when people report the gain.

Tax does not have to be paid on the winnings people make from ISAs, UK government gilts and premium bonds, or on winnings from betting, lottery or pools.

Other assets are also exempt from tax, such as passenger cars, including vintage cars, donations to UK registered charities and foreign currency held for own use.

The government has frozen the capital gains deduction at £12,300 until 2025-26.

Calls have been made to reform capital gains in the UK as it has been described as “too complicated”, but the Chancellor has yet to announce a consultation on the tax.

Maria D. Ervin