Capital Gains Tax: What You Need to Know

Capital gains tax (CGT) is relatively simple to understand – but like most taxes, the details can be complicated. Here's a quick guide to this tax, including when you have to pay it and how much you need to pay.

Capital Gains Tax: A Quick Overview

Capital gains tax (CGT) is often due when you sell something of value for a profit. The tax involves paying a percentage of the profit you make.

This could be when you sell a property that is not your main home, like a buy-to-let property. If you sell it for a profit, you will need to pay CGT on the profit that you make.

What Is Capital Gains Tax Paid On?

As well as paying CGT on properties, you might also have to pay it on shares that you sell, antiques, jewellery, precious metals and collectibles.

Not all personal possessions will be liable for the tax, and this is when you need to find out exactly what you should be paying. Isas and pensions are free from CGT.

How Much Will You Pay?

Working out how much you will need to pay can be a complex process, which is why hiring an accountant is a good idea.

The first important figure is the profit you make on the item. Let's use the example of a property.

If you buy a property for £200,000 and sell it for £250,000, you will make a profit of £50,000.

However, you would not automatically pay CGT on this full amount. Firstly, you have an allowance of £11,100 per year. If you make any gains below this amount, you don't pay tax at all.

From your £50,000, you can deduct the personal allowance. You can also deduct other expenses like stamp duty and legal fees. You might be left with a figure of about £30,000, and you would then pay tax on this amount.

The amount you pay in tax is determined by how much you earn. If you are a basic rate income tax payer, you will pay 18%. If you are a higher rate income tax payer, you will pay 28%.

These rates apply to properties, but for other types of capital gains tax, the basic rate is 10% and the higher rate is 20%.

Which? has a useful guide to allowances and rates that you might want to read.

Hire a Specialist to Help

As you can see, it can be a complex issue, and you will not want to make any mistakes. An accountant will help you to work out how much to pay and avoid under-paying or over-paying what's due.

At Keith Graham, we can also provide advice for your situation, which might even lead to a lower tax bill.

For example, if you are married on in a civil partnership, you and your partner both have an allowance of £11,100 per year, and you might be able to transfer an asset into both of your names and save money.

This is just one example, so it really can pay to get professional help from a tax specialist. If you are selling anything of value and you want some assistance, we would be happy to help.

And you can read more about capital gains tax at the Gov.uk website.