Understanding Capital Gains Tax for individuals

To understanding which assets are subject to Capital Gains Tax (CGT), when a tax liability may arise, and how to report gains read this guide. 

By understanding and utilising the available resources and professional advice, you can manage your CGT obligations effectively and minimise your tax liability. 

Common Assets subject to CGT 

Many types of assets can be subject to Capital Gains Tax when disposed of, including: 

Stocks and Shares: Selling shares at a profit can trigger CGT. 

• Bonds: Gains from bonds may also be subject to CGT. 
• Cryptoassets: If you hold cryptoassets for personal investment and made a gain this may be subject to CGT. 
• Property: Selling a property that has not always been main home may result in a CGT liability. 
• Personal possessions: Items such as jewellery, antiques, and art may be subject to CGT if the value exceeds £6,000. 
• Precious metals: The sale of gold, silver, and other precious metals can incur CGT. 

Assets with a lifespan of less than 50 years are not likely to incur CGT on disposal. These include cars, equipment and furniture. 

A UK resident is generally liable to CGT on disposal of worldwide assets. 

Individuals don’t usually pay CGT on gifts to your husband, wife, civil partner or charity. 

Capital Gains Tax rates 

The rate of Capital Gains Tax depends on whether you’re a basic, higher or additional rate taxpayer, as well as the type of asset disposed of. A change in CGT rates was announced at the Autumn Statement 2024, with rates changing from 30th October 2024.

From 30th October 2024

A higher or additional rate taxpayer pays CGT at 24% on residential property, 28% on gains from carried interest and 24% on other chargeable assets. 

A basic rate taxpayer pays CGT at 18% on residential property and carried interest gains, and 18% on other chargeable assets. 

If you are a trustee or a personal representative of someone who has died the rates are the same as those for higher and additional rate taxpayers, 24%/28%/24%. 

From 6th April 2024 to 29th October 2024

A higher or additional rate taxpayer pays CGT at 24% on residential property, 28% on gains from carried interest and 20% on other chargeable assets. 

A basic rate taxpayer pays CGT at 18% on residential property and carried interest gains, and 10% on other chargeable assets. 

If you are a trustee or a personal representative of someone who has died the rates are the same as those for higher and additional rate taxpayers, 24%/28%/20%. 

From 6th April 2025, the CGT rate on carried interest will increase to 32%.

The sale of certain business assets may be taxed at a special rate of CGT under Business Asset Disposal Relief. The rate of CGT for BADR is currently 10%, and will increase to 14% from 6th April 2025 and 18% from 6th April 2026.

Individuals in Scotland and Wales must use the UK rates and bands to calculate CGT, even if you pay income tax using different rates and bands. 

Navigating CGT reliefs 

CGT legislation can be complex, with numerous reliefs and exemptions available. These provisions can significantly reduce the amount of tax owed if properly utilised. For instance: 

• Annual Exempt Amount (AEA): Individuals and trusts have an annual tax-free allowance for capital gains. Gains below this threshold are not taxed. The current AEA is £3,000 (2024/25). If you are disposing of multiple assets, this allowance can be used first against gains at the higher rate. Unused AEA can’t be carried forward to other periods. 
• Private Residence Relief (PPR): If the asset is, or has been, your main home, you may qualify for private residence relief. This relief can potentially exempt the gain from CGT, particularly where you have lived in the property for the entire period of ownership. 
• Business asset disposal relief (BADR): For business owners selling all of part of their business, or qualifying business assets, they can lower the rate of tax using BADR. 
• Gift relief: This relief may defer the tax when gifting certain assets, especially within family contexts. 

Given the complexity of CGT, seeking professional advice is highly recommended. 

How to calculate Capital Gains Tax 

To calculate the capital gain, you take the proceeds from sale (or market value of the asset if this was gifted or disposed) and deduct the original cost of the asset. You are also able to include in the calculation any costs incurred in relation to the purchase or sale. 

This gain is then taxed at the relevant rate. For example, if an individual sold a property that was subject to CGT the tax would be calculated as follows. 

Sales proceeds of property	£400,000
Deduct: allowable sale fees	£2,000
Net proceeds of property	£398,000
Deduct: Original purchase price	£322,000
Deduct: allowable purchase fees	£1,000
Gain	£75,000
CGT (£75,000 x 24%)	£18,000

Note: the individual in the example is a higher rate taxpayer and no reliefs are available, the disposal was made prior to 30th October 2024. 

If you owned the asset prior to 31st March 1982, you must use the market value of the asset at that date rather than the original purchase amount. 

Part disposals 

If you dispose of part of an asset, the calculation to determine the cost of the part being disposed of is: 

Original whole cost x (Sales proceeds/(Sales proceeds + market value of unsold part)) 

The rules are different for selling part of shares, where you should seek expert advice. 

Capital losses 

If you dispose of an asset at a loss, you may want to report this to HM Revenue & Customs (HMRC). Losses can then be offset against future capital gains, reducing the ultimate amount of tax you pay. 

Reporting Capital Gains 

Whether you need to let HMRC know about a gain will depend on how much the gain is, and whether any tax is payable. 

If your gains are below the CGT AEA, you only need to report your gains if: 

• your gains in a tax year have sales proceeds exceeding £50,000 
• and you’re registered for self-assessment you’ll need to report the gains to HMRC. 

It may be possible to report your gains and CGT on your self-assessment tax return, but you may have to complete a separate declaration before this. CGT on property must be reported to HMRC within 60 days of completion. 

Non-UK residents must report gains to HMRC, even if a loss is made or the gain is below the AEA. 

Failure to let HMRC on time may result in penalties and interest. 

Tax planning and CGT mitigation 

If you are planning to sell a personal asset, or all or part of your business, strategic tax planning can help mitigate or reduce potential CGT liabilities. The timing of a disposal can be essential in planning. While you can’t generally plan when a property will sell, being aware of this in conjunction with other disposals is crucial. 

How TaxAssist Accountants can help 

To navigate the complexities of Capital Gains Tax and ensure compliance while maximising potential savings, we recommend you consult with your accountant 

Our team can provide comprehensive advice tailored to your specific circumstances, helping you prepare CGT computations, claim applicable reliefs, and plan strategically for asset disposals. 

Call us today on 0131 202 9888 to arrange a free meeting or use our online contact form. 

Last updated: 31st October 2024