Article written by Kellands Hale our preferred independent advice firm.
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The current capital gains tax (CGT) allowance is £3,000 for the 2024/25 tax-year. This allowance is reduced to £1,500 for Trusts.
It is not certain whether there will be any change to capital gains tax in the near future, however, this has been changed at short notice in the past.
You pay capital gains tax on the gain when you sell (or ‘dispose of’):
These are known as ‘chargeable assets’ and you only pay CGT if your total gain is above the annual CGT exempt allowance.
No-one individual is exempt from paying CGT. However, there are instances when CGT does not apply:
If you are a higher rate taxpayer then you will pay 24% CGT on property sales (residential) and 20% on other assets. If you are a basic rate taxpayer, the rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets.
If you are a Trustee or business, then the same rules apply as if you were a higher rate tax payer.
There is no age limit that is exempt from CGT. Everyone is entitled to a CGT annual exempt allowance but then pays tax on the gain like everyone else.
Yes, and the gain upon sale of an asset can be used to pay that tax.
Whilst income is an important factor when assessing CGT, any gain realised from a qualifying asset does not class as income.
You do not have to pay tax if your total taxable gains are under your capital gains tax allowance. You still need to report your gains in your tax return if both of the following apply:
If you fail to report in time, then you may be liable to a late filing fine. You must contact HMRC if unsure.
The following table provides the timeframes for declaring and paying CGT:
UK tax residence status |
Asset type |
Required to report the disposal within 30 days? |
Deadline for paying tax |
Resident |
UK residential property |
Only if there is tax to pay* |
30 days |
Anything other than UK residential property |
No |
31 January following the end of the tax-year |
|
Non-resident |
UK land and property |
Yes* |
30 days* |
Anything other than UK land and property |
No |
N/A |
*Capital gains tax for non-residents may not apply to the whole gain. If not, you may have to pay more tax if you return to the UK after a period of temporary non-residence.
If you sold a residential property in the UK between 6 April 2020 and 26 October 2021 then you have to report and pay CGT within 30 days of sale. For residential property with a completion date on or after 27 October 2021, CGT needs to be reported and paid within 60 days.
This does not apply to properties that you have lived in for the entire time you owned it. Even if you have rented the property out at some point in the past, there are certain exemptions available, including the discounting of certain years your lived and owned the property.
Remember, it’s only the “gains” that are taxed and you’ve also got a £3,000 capital gains tax-free allowance, and any costs involved in selling the property are discounted as well. So, let’s say the property was valued at £250,000 at the time you inherited it, but it’s increased in value to £300,000 when you come to sell it, and you pay £5,000 in costs. You’ll therefore pay capital gains tax on £32,700 (the £50,000 profit minus the £5,000 costs and £3,000 tax-free allowance).
The actual amount of tax you’ll pay will vary depending on your tax bracket – if you’re a higher or additional rate taxpayer, capital gains tax is charged at 24% on residential properties, while for basic rate taxpayers, the rate paid depends on your income and the size of the gain (18% if your taxable gains plus taxable income falls within the basic income tax band, and 24% on any amount above it).
This is a complex area, and you should speak to an Accountant when dealing with the sale of a rental or partly rented property.
There are certain years that are exempt from CGT over the time period you owned the property. Essentially, you do not pay CGT on the years that you have been resident in a property, along with certain other years when you owned the property but did not live there. Again, this is a complex area which requires a professional Accountant to calculate if you feel this affects you.
How long do you need to live in a house to not pay capital gains? There are certain years that are exempt from CGT over the time period you owned the property. Essentially, you do not pay CGT on the years that you have been resident in a property, along with certain other years when you owned the property but did not live there. Again, this is a complex area which requires a professional Accountant to calculate if you feel this affects you.
Kellands (Hale) Limited {“Kellands”) is a firm of Chartered Independent Financial Advisers and our scope of authorised business activity under Financial Conduct Authority (FCA) regulations is restricted to advising and arranging life insurance, pensions, investments, protection, mortgages and general insurance contracts. Kellands is not authorised as legal specialists, accountants or tax advisers. It may be appropriate for you to seek specialist legal advice on tax matters. This guidance on CGT has been prepared by Kellands with support of trusted tax specialists and is intended as a high level overview which is provided as information only and should not be relied upon in isolation.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.