A Capital Gains Tax is a tax on the profit (also known as the gain) made when you sell or ‘dispose of’ an asset. In other words, you pay taxes on the gain that is made – not the proceeds of the sale. If you give an asset away for free you may still be liable for CGT.

Things that may be subject to CGT:

• Personal possessions with a cost or value of more than £6,000 in (not including cars)
• Residential property which has not been your main home (or has some space used solely for business purposes) throughout ownership.
• Shares held outside an ISA or pension fund
• Businesses and business assets
• Digital assets such as crypto assets

The annual CGT exemption is £3,000 for the 2024/25 tax year.

CGT rates are based on your total taxable income and the type of asset disposed of:

Basic rate taxpayers: 10%, rising to 18% residential property

Higher rate taxpayers: 20% on gains from most assets, 24% on residential property, 28% on carried interest.

You are able to report and pay CGT through Self Assessment. However, UK residential property disposals must be reported within 60 days of completion – the tax can be paid by the normal 31 January deadline.

Ways to reduce your CGT tax bill are:

• Use your annual CGT exemption
• Consider transferring assets to your spouse/civil partner to utilise their exemption and tax bands
• Use tax-efficient investments such as the Enterprise Investment Scheme (EIS), or SEIS
• Use losses from other investments to reduce your taxable gains

Residential property gains are taxed at higher rates (18% for basic rate taxpayers, 24% for higher/additional taxpayers).

Some assets are not subject to CGT.

• Your main home provided it qualifies as your main home throughout ownership and no part has been used exclusively for business at any time.
• Personal property not exceeding £6,000 in acquisition or disposal value
• Assets held in an ISA or certain pension funds
• Qualifying UK Government Gilts and Premium Bonds
• Gifts to registered charities

Some things you should record are:

• The date of acquisition and disposal of assets
• The price you bought it for (or value at the acquisition date if not bought) and the sales price or value at the date of your disposal / gift
• Any costs associated with your acquisition and disposal (e.g. legal fees, stamp duty)
• Any capital improvements to the property / asset that are still reflected in the state of the asset at sale

CGT is not payable on an inheritance but you may be liable to CGT on the disposal of an inherited asset based on the increase in value when compared to the probate value.

There are some ways you can defer or rollover CGT.

Gifts of certain businesses assets (or assets immediately chargeable to Inheritance Tax) can be eligible for Gift Relief, which has the impact of deferring the gain until the asset is disposed of again.

When incorporating your business it is also possible to defer the taxable gains by rolling them over into the base cost of the shares in your business, provided certain conditions are met.

Entrepreneurs Relief (now known as Business Asset Disposal relief) enables you to pay only 10% in capital gains tax for qualifying business disposals, up to the first £1 million of gains during your lifetime.

If you have losses, they are offset against gains made in the same year in priority to losses in previous years or your annual exemption. If you have made a net loss for the year then this will be brought forward to be offset against your net gains in a future tax year. In some cases, losses on certain shares can be offset against your income (usually not for publicly listed shares).

Non-residents are required to pay CGT on UK residential property from 6 April 2019. They are also liable to UK CGT on the disposal of shares in a property rich company or the disposal of assets used in connection with a trade, profession or vocation carried out in the UK.