If you sell something (such as a property, painting or land), for more than you brought it for, you pay a tax called Capital Gains Tax on the increased value.
What assets do I need to pay capital gains tax on?
Capital gains tax is paid on the gain when you sell:
- A property which isn’t your main home
- Your main home if you’ve ever let it out, it’s very large or used it for business.
- Business assets
- Personal possessions worth more than £6,000 such as jewellery, paintings, antiques and sets of things such as matching vases
What assets are not liable to capital gains tax?
You don’t have to pay capital gains tax on:
- your car, unless you used it for business.
- your main home, except in the instances above.
- anything with a limited lifespan of less than 50 years
- gifts to your husband, wife, civil partner or a charity
- ISAs or PEPs
- UK government gilts and premium bonds
- Betting, lottery or pools wins
- Gains under your annual tax free allowance (£11,300 for 2017-18)
How do I report a gain to HMRC?
If you are registered for self assessment you complete the capital gains tax pages. You will then need to pay the tax due on the gain by 31st January (2018 for gains in the tax year 2016-17). If you don’t complete a self assessment return you will need to report your gain to HMRC through the government gateway online portal.
How much capital gains tax will I pay?
Higher rate tax payer pay 20% capital gains (28% on residential properties). If you’re a basic rate tax payer you will pay 10% (18% on residential properties) if the amount is within your basic income tax band. If the amount means you go into the higher rate tax band you will pay the higher rates on the part which is in the higher rate band.
Reliefs against capital gains tax
There are some reliefs against capital gains tax which may be available in some circumstance such as selling a rental property which you previously lived in. It’s always best to consult a tax expert to ensure you don’t over pay your tax.
For More Information contact Emma Stevens