If you’ve sold a house, shares, or even a valuable piece of art, you might hear the term capital gains tax (CGT). It’s the tax the government takes on the profit you make when you sell something for more than you bought it for. You don’t pay it on everyday purchases, only on the gain – the difference between what you paid and what you received.
Not every sale triggers CGT. You only owe it if the profit exceeds the annual tax‑free allowance. For the 2024‑25 tax year the allowance is £6,000. Anything below that is tax‑free. If you’ve sold multiple items, you add up all the gains and subtract the allowance once.
Common assets that attract CGT include:
Your main residence is usually exempt, but if you’ve let part of it or used it for business, a portion may be chargeable.
CGT rates depend on your overall income. If you’re a basic‑rate taxpayer, you pay 10% on most gains and 18% on residential property gains. If you’re a higher or additional‑rate taxpayer, the rates jump to 20% and 28% respectively. The tax you owe is calculated after you deduct any eligible reliefs.
Key reliefs you might claim:
Keep records of purchase price, sale price, costs like stamp duty and solicitor fees – they lower the gain you report.
You report CGT on your Self‑Assessment tax return. If you’re not already filing a return, you’ll need to register for Self‑Assessment before 5 October following the tax year of the sale. When you file, you’ll fill in the ‘Capital Gains summary’ section, enter each asset’s details, and the system will work out the tax due.
For residential property sales, you must pay any CGT within 30 days of the completion date. HMRC now offers an online “Pay CGT” service that makes the payment quick.
If the sale occurs after 6 April 2024 and the gain is over the allowance, you can use the new ‘real‑time’ filing option. This means you tell HMRC the gain as soon as the sale finishes, rather than waiting for the annual return.
1. Timing matters – If you’re close to the allowance limit, consider spreading sales over two tax years.
2. Use spouse transfers – Transfers between married couples or civil partners are tax‑free, so you can split gains and double the allowance.
3. Claim all costs – Legal fees, broker fees, and improvement costs can be deducted from the gain.
4. Plan for property reliefs – If you’ve lived in a home and later let it, keep a record of the period you lived there – you may qualify for partial Private Residence Relief.
5. Invest in tax‑efficient wrappers – ISAs and pensions shelter gains from CGT altogether.
Understanding CGT doesn’t have to be a headache. By knowing when it applies, what rates you face, and the reliefs you can claim, you can make smarter selling decisions and keep more of your hard‑earned profit.
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