What is Capital gains tax (CGT)?
CGT is a tax charge applied to the gain from the sale of something you own. It’s calculated from the gain made, the increase in value of the sale price compared to the purchase price, for an asset held for more than one year.
Typically it’s applicable to:
- Shares
- Investment funds
- Second properties
- Inherited properties
- The sale of a business
- Valuables including art, jewellery, and antiques
- Assets transferred at below their market value
Capital gains on these assets are curently taxed at different rates than those of income tax. This is because purchasing such assets is seen as taking a risk, either entrepreneurial or investment, so the additional burden of risk carries greater potential reward.
Our Capital gains tax service
Advice from qualified staff
We are qualified Tax Advisor and are regulated by the Association of Taxation Technicians (ATT) and the institute of Chartered Accountants in England & Wales (ICAEW).
CGT is a complex area of Taxation and often will relate to high value items such as property or shares that makes it essential that you get professional tax advice. We have years of experience in helping our clients with CGT and we will only get involved where we have the right knowledge and expertise to ensure you make the most of any tax reliefs available and plan your disposal to minimize your tax liability.
Complete Service
We provide a complete CGT service from planning your disposal, determining your options, reliefs you may be eligible for to computing and submitting your CGT return. Significant amount of tax can be saved when the purchase or disposal of assets are planned properly.
Our specialist tax adviser will handle the entire tax return process, deal with HMRC on your behalf, and provide full support throughout the process until completion. You will never find yourself alone or burdened again.
How much is Capital Gains Tax in the UK?
If you make a gain after selling a property, you’ll pay 18% capital gains tax (CGT) as a basic-rate taxpayer, or 28% if you pay a higher rate of tax. Gains from selling other assets are charged at 10% for basic-rate taxpayers, and 20% for higher-rate taxpayers.
You’ll only need to pay these rates on the gains that exceed your capital gains allowance.
CGT allowance for 2021-22 and 2020-21
The capital gains tax allowance in 2021-22 is £12,300, the same as it was in 2020-21.
This is the amount of profit you can make from an asset this tax year before any tax is payable.
If your assets are owned jointly with another person, you can use both of your allowances, which can effectively double the amount you can make before CGT is due.
If you are married or in a civil partnership, you are free to transfer assets to each other without any CGT being charged.
The table below explains your CGT allowance for the tax years 2020-21 and 2021-22.
| Tax year | 2020-21 | 2021-22 |
|---|---|---|
| CGT allowance for an individual | £12,300 | £12,300 |
| Couple’s allowance (married or in a civil partnership only) | £24,600 | £24,600 |
However, if you choose to transfer any of your assets to your partner, bear in mind that if you later sell the asset, you’ll be charged based on the gain made during the period it was owned by you as a couple, rather than since the asset was passed to your partner.
If you don’t make full use of your CGT allowance in a given tax year, you aren’t allowed to carry it forward to the next.
3. When do you have to pay Capital Gains Tax?
CGT isn’t as simple as declaring your gain and applying the relevant rate. Firstly there is the annual CGT allowance of £12,300. This is the amount of profit you can make before CGT is applied. If you’re gains are under this amount in the tax year then there is no CGT liability. However, you can’t carry forward to the following year if you don’t make use of the allowance when selling your assets.