Capital Gains Tax

Capital Gains Tax

What is capital gains tax?


Capital gains tax arises when you make a profit on the sale of an asset e.g. a house. Remember you are taxed on the gain you have made, not the total amount received. So if you made a £50,000 gain on an asset you sold for £300,000, you'll be taxed on the £50,000 gain you made.

When do I need to pay tax?


You'll have to pay tax if you make a gain (above the Annual Exempt Amount) on:


  • personal items worth more than £6,000 except a car
  • property that's not your main home
  • your main home which you have been using for business or is very large
  • business assets
  • any shares that are not in a ISA or PEP
  • overseas property
  • UK land and property even if you are living abraod


You do not have to pay tax if:


  • your total gains are below the tax-free allowance, known as the Annual Exempt Amount of £6,000 (£3,000 for trusts) for the tax year 2023 - 2024.
  • you gift the item to your spouse or a charity
  • you have UK government gilts or premium bonds
  • get betting, lottery and pool winnings
  • you live abroad and sell assets other than property and land in the UK
  • someone dies, Inheritance Tax is usually paid by the estate of the person that has died. You may need to pay Capital Gains Tax if you later dispose (sell) of the asset.


You also do not have to pay tax when you sell or dispose of your home, if you meet all the conditions for 'Private Residence Relief':


  • you own one home and have lived in it the entire time you've owned it
  • you have not let out part of your home, except to lodgers or family members
  • you do not use your home exclusively for business
  • the grounds are not greater than 5,000 square metres
  • you did not buy the property just to make a gain


Can I deduct expenses when I sell my property?


When working out your gain, you may be able to deduct certain costs you've incurred when buying, selling or improving your property. These could be:


  • costs of putting in an extension
  • estate agent, accountant or legals fees
  • stamp duty


Remember, items such as repairs cannot be deducted. Instead, these can deducted on your individual self assessment tax return.


When do I need to report and pay Capital Gains Tax?


If your taxable gains are above your tax allowance, you will need to report it to HMRC within a certain period:


  • 60 days - if you have sold a residential property in the UK where the completion date was on or after 27 October 2021
  • if you have other gains, you can report these in your individual self assessment tax return in the tax year after you completed the sale of the asset

What are the Capital Gains Tax rates?


You pay different rates of tax for capital gains than on income tax and depending on the type of asset that you have sold.


You will pay the basic rate if your taxable gains and income for the tax year are within the basic income tax band:


  • 18% on residential property and
  • 10% on other chargeable gains


You pay the higher rate if your taxable gains and income are above the basic threshold:


  • 28% on residential property and
  • 20% on other chargeable gains


If you are a trustee or a business


You pay the higher rate as above. However if you are a sole trader or in a partnership, you may be able to qualify for Business Asset Disposal Relief (previously known as Entreprenuer's Relief) and pay only 10%.



Should you wish to sign up for our services, please click below to fill our onboarding form or tax return form and our accountant will be in touch within two working days.

Share by: