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Capital gains tax allowances and rates
You might have to pay capital gains tax if you've sold a property that you own for more money than you bought it for. However, it should only be due if the property is not your main residential home, and the profit you've made exceeds the current year's capital gains tax threshold.
How much is the capital gains tax allowance?
The capital gains tax allowance you're entitled to depends on your level of taxable income (tax bracket) and the type of assets that you sell. The allowance changes each tax year, but the rates you’ll pay don’t always change and are aligned with income tax brackets.
Currently, these are the rates payable on disposal of property assets, depending on your income tax bracket.
| Income tax bracket | Capital gains due on property sales |
|---|---|
| Basic rate (£12, 571 - £50, 270) | 18% |
| Higher rate (£50,271 - £125,139) | 28% |
| Additional rate (£125,140+) | 28% |
Different rules apply to trusts, find out more about capital gains tax for trusts here.
What are the Capital Gains Tax rates in the UK for 2023/24?
Often when people are looking for the capital gains tax ‘rates’ what they actually mean is the tax free allowance threshold. The rates payable in the table above have been constant for a number of years.
The capital gains tax allowance for the 2023/24 tax year is £6000 - a reduction of more than 50% on the previous years allowance.
This is expected to be further reduced to £3000 in the next tax year, if current government plans go ahead.
The same tax free allowance applies to everyone, regardless of income tax bracket, and cannot be shared with others.
What were the capital gains tax rates for in previous years?
Over the past decade the capital gains tax free allowance remained fairly constant, with a dramatic drop in the 2023/24 tax year. This is likely to have a significant impact on buy-to-let investors who are looking to expand their portfolio.
| Previous tax years | Capital gains tax allowance | Change |
|---|---|---|
| 2022/23 | £12,300 | No change |
| 2021/22 | £12,300 | No change |
| 2020/21 | £12,300 | £300 increase |
| 2019/20 | £12,000 | £300 increase |
| 2018/19 | £11,700 | £400 increase |
| 2017/18 | £11,300 | £200 increase |
| 2016/17 | £11,100 | No change |
| 2015/16 | £11,100 | No change |
What is considered a capital gain?
Capital gains tax, or CGT, is a tax payable on any profit made 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 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?
Capital gains tax is payable on property when you make a profit from the sale of any property that is not your main residential home. You also have to pay CGT on profits made from the sale of other high-value assets:
Holiday homes and holiday lets
Buy to let investment properties
Any other commercial property
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)
Crypto Assets 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 do you calculate how much CGT you have to pay?
Here are the steps to calculate how much you owe in capital gains tax:
Work out the gain for each asset you’ve made a profit on (or your share of an asset if it’s jointly owned)
Add together the gains from each asset
Deduct any ‘allowable losses’ if applicable
If the total is greater than the relevant tax year’s CGT allowance (currently £6000), you’ll need to pay the appropriate CGT rate on the element that exceeds it for your tax bracket
If you need to pay capital gains tax, you can also find help with calculating how much you need to pay using the government’s capital gains tax calculator.
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 it’s your personal responsibility to work out if you’ve 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’re unable to use the service.
Don't get caught out: Although capital gains tax is self-reportable, if you do not inform HMRC about any relevant profits and pay the applicable CGT owed, they will issue fines that are likely to outweigh the original bill!”Kellie Steed, Mortgage Content Writer
Capital gain tax FAQs
Are your assets included in your CGT at market value?
A gain for the purpose of CGT is usually the difference between what you paid for your asset and what you sold it for.
However, there are some situations where the market value should be used instead:
Gifts should be costed at market value at the time the gift was given
For assets that were sold at a discount rate to benefit the buyer, the market value at the date of sale should be used
For inherited gifts where the inheritance tax value is unknown, the market rate at the gift givers time of death should be used
For any assets owned prior to 1982, the market value at 31 March 1982 should be used
What profits are CGT free?
Any profits that are below the current CGT threshold of £6000 are free from capital gains tax liability, as well any profits from wasting assets (such as cars) or profits made from the sale of your main residential home, in most cases.
Are there ways to reduce your capital gains tax?
There are a few ways to reduce the capital gains tax you might need to pay, depending on your circumstances. HMRC has allowable losses, so if you've made a loss on the sale of any assets you've sold, this is deductible from any CGT that you owe. The allowance is also transferable between different tax years, if you didn't use all of your allowable losses from previous years.
Do I need to pay capital gains tax when I sell my home?
People don't usually have to pay capital gains tax when they sell their residential home, as your main residence is usually exempt from capital gains tax.
However, CGT may be due on your main home if you've let it out or used it as a business premises or if the size of the property (including grounds) exceeds 5,000 square metres.
If you sell a second home, or any subsequently owned residential properties, all profits will be subject to capital gains tax.
