Capital gains tax allowances and rates

What is considered as a capital gain?

Capital gains tax, or CGT, is a tax payable on any profit you make when selling or otherwise disposing of an asset. The tax only applies to the profit, i.e. the difference between the price you paid and how much you get back when you sell it.

For example:

You buy a property for £200,000

You then sell it for £210,000

Capital gains (or profit) from this transaction would be £10,000

You will therefore need to pay tax on that £10,000*

*if the property is not your main home, and your total capital gains exceeds the annual tax-free allowance given for the current tax year.

If you sell an asset you own with someone else, such as a property you jointly own with a partner, you may also have to pay capital gains tax on your share of the gain.

You won’t usually need to pay capital gains tax when you sell your main residential home, unless you have let out part of it for profit, used it solely for business purposes or it exceeds 5000 square metres.

What do you pay capital gains tax on?

When we think about property, capital gains tax is payable when you make a profit from the sale of any property that is not your main residential home, so could include:

• Second homes

• Holiday homes and holiday lets

• Buy to let investment properties

• Any other commercial property owned

Capital gains tax does not only apply to property, however, and may also apply to other assets or possessions, such as:

• Jewellery, paintings, antiques, and coins worth £6,000 or more

• Shares that aren't in an ISA (Individual Savings Account) or a PEP (Personal Equity Plan)

• Non-property business assets, that are not classed as wasting assets (wasting assets typically have a lifespan of less than 50 years, so things like cars or furniture)

• Cryptoassets such as cryptocurrency or NFTs

Are gifts included in the capital gain tax allowance?

There are lots of capital gains tax exemptions, including certain gifts, such as:

• Gifts between husband and wife or registered civil partners

• Gifts to charities

• The sale or gifting of private cars

• The sale or gifting of jewellery, antiques, paintings and coins worth below £6,000

• Gambling winnings 

• ISAs, pensions and other national savings products

• Life insurance payouts, unless they are second hand

• Anything you leave behind when you die (although inheritance tax may apply)

How much is the capital gains tax allowance?

The capital gains tax allowance you are entitled to will depend on your income and the type of assets you sell. The allowance will change each tax year, so be sure to calculate your taxable profit based on the relevant entitlement.

The UK capital gains tax allowance for 2022/23 has not yet been announced, however, this will not apply until April 6th 2023. 

The capital gains tax allowance 2021/22 is £12,300

This amount is for individuals, so a married couple or civil partners will receive £24,600 allowance on jointly owned assets.

If you sell an asset that is liable for CGT before and including April 5th 2023, the allowance for the 2021/22 tax year will apply.

Different rules apply to trusts, find out more about capital gains tax for trusts here. 

What are the capital gains tax rates for 2022-2023?

The tax rates for capital gains have not changed since 2017, however, if there is to be any change to the capital gains tax rates for 2022/23, this will be made public in April.

At the current time, the CGT rates are:

• 10% for basic rate taxpayers, and 20% for higher and additional rate taxpayers for non-property assets

• 18% for basic rate taxpayers, and 28% for higher and additional rate taxpayers for second homes and investment properties

If you are usually a basic rate taxpayer but your capital gains push you over the basic rate taxpayer threshold, you will be charged CGT at the same rate as higher rate taxpayers.

Using losses to reduce your capital gains tax

You can report any losses from the sale of assets that would usually be liable for CGT to HM Revenue and Customs (HMRC). These are known as ‘allowable losses’ and are deducted from any gains you’ve made in the same tax year.

If you still owe CGt after reporting losses from the current tax year, you can also deduct any unused losses from previous tax years.

When should you pay the capital gains tax?

HMRC does not send out bills for Capital Gains Tax, so you will need to work out if you have made CGT gains above your tax-free allowance.

If your total taxable gains are above your allowance, you’ll need to report and pay Capital Gains Tax within the designated timescales:

• Within 60 days for any property sale (except your main residential home) in the UK with a completion date on or after 27 October 2021

• Within the tax year after you sold or disposed of any non-property related asset

How can you pay the capital gains tax?

Payments are usually made online using the government gateway service, and can be done through your tax return, should you provide one. You can also use the HMRC real-time capital gains tax service or contact HMRC to request a paper CGT form if you are unable to use the service.