Hamilton Blake Consulting’s experienced tax advisors are able to assist you with a wide range of complex tax issues, including capital gains tax.

If you intend to sell one of your assets in the near future, it may be worth first spending some time on tax planning. Here’s everything you need to know about capital gains tax, including how the system may change in 2021…

What is capital gains tax?

Capital gains tax is a type of tax paid on the ‘profit’ of selling an asset. This occurs if you sell something for more than you paid for it because its value has appreciated (increased).

For example, you could purchase an antique item for £5,000 and later sell it for £25,000. This means you made a gain (or profit) of £20,000.

You may also be subject to capital gains tax if you are gifting an expensive item (including selling items at less than market value).

What do I have to pay capital gains tax on?

Many assets may incur capital gains tax when they are sold. Here’s HMRC’s guidance on what items may be subject to capital gains tax:

  • most personal possessions worth £6,000 or more, apart from your car
  • property that’s not your main home
  • your main home if you’ve let it out, used it for business or it’s very large
  • shares that are not in an ISA or PEP
  • business assets

Do I have to pay capital gains tax on the sale of all assets?

You don’t have to pay capital gains tax on the sale of all assets. Everyone has a tax-free allowance on capital gains. The allowance is:

  • £12,300
  • £6,150 for trusts

You don’t need to pay tax on any profits below your personal allowance.

Additionally, certain assets are ‘tax-free’, which is to say they are never subject to capital gains tax. HMRC advises that individuals do not need to pay capital gains tax on profits from:

  • ISAs or PEPs
  • UK government gilts and Premium Bonds
  • betting, lottery or pools winnings

Although gifts can be subject to capital gains tax, an individual does not need to pay capital gains tax on any gifts to their spouse/partner, or any gifts to a charitable organisation.

 

What are the rates for capital gains tax?

In 2019-20, the rates for capital gains tax were as follows:

Basic rate taxpayers (income of £12,501 to £50,000)

  • 10% capital gains tax on assets
  • 18% capital gains tax on property

Higher rate taxpayers (£50,001 to £150,000+)

  • 20% capital gains tax on assets
  • 28% capital gains tax on property

It is possible that the rate of capital gains tax will increase for the 2021-22 tax year. However, no official announcement was made during the Chancellor’s Spring Budget (March 3rd) or on the new ‘Tax Day’ (March 23rd). As soon as we have any clearer details on a possible change to the capital gains tax rates, we will update you.