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.
You'll have to pay tax if you make a gain (above the Annual Exempt Amount) on:
You do not have to pay tax if:
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':
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:
Remember, items such as repairs cannot be deducted. Instead, these can deducted on your individual self assessment tax return.
If your taxable gains are above your tax allowance, you will need to report it to HMRC within a certain period:
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:
You pay the higher rate if your taxable gains and income are above the basic threshold:
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%.
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