Tax

Capital gains tax (CGT)

When is CGT payable?

You may have to pay CGT if, for example, you:

Sell, give away, exchange or otherwise dispose of (cease to own) an asset or part of an asset
Receive money from an asset - for example compensation for a damaged asset

You don't have to pay CGT on:

Your car
Your main home - provided certain conditions are met
ISAs or PEPs
UK Government gilts (bonds)
Personal belongings worth £6,000 or less when you sell them
Betting, lottery or pools winnings
Money which forms part of your income for income tax purposes

These are some points to bear in mind:

If you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
You can't give assets to your children or others or sell them assets cheaply without having to consider CGT
If you make a loss you may be able to make a claim for that loss and deduct it from other gains, but only if the asset normally attracts CGT - for example you cannot set a loss on selling your car against gains from disposing of other assets
If someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time - however if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal

Tax section links:

a guide to tax | income tax | capital gains tax | inheritance tax | self assessment

How is CGT worked out?

CGT is worked out for each tax year (which runs from 6 April one year to 5 April the following year). It is charged on the total of your taxable gains, after taking into account:

Certain costs and reliefs that can reduce or defer gains
Allowable losses you have made on assets to which normally CGT applies
The annual exempt (tax-free) amount (the AEA) - this is £10,100 for every individual in the tax year 2009-2010

For disposals on or after 6 April 2008 there is a single rate of capital gains tax of 18%. As part of this new system the annual exempt amount (£9,600 - 2008/09) remains in place although taper relief and indexation allowance are now withdrawn with effect from 5 April 2008.

Business assets enjoy particularly favourable relief - reference should be made to an accountant for full details. Broadly speaking gains arising on the disposal of certain business will qualify for an effective rate of CGT of 10% (2008/09).