Understand Capital Gains Tax before you sell an asset.
Learn how Capital Gains Tax works, what a capital gain is, which types of assets can be relevant and how allowances, reliefs and individual circumstances can affect the amount of tax that may be due.
A gain is not necessarily the same as the sale price.
A simplified example can help explain the basic idea behind a capital gain.
What is Capital Gains Tax?
Capital Gains Tax, commonly called CGT, is a tax that can apply when you dispose of certain assets for more than they cost you.
The key figure is generally the gain, not the full sale price.
In simple terms, a capital gain can arise when an asset is sold or otherwise disposed of for more than its allowable acquisition cost, after taking relevant costs into account.
Whether CGT actually applies depends on the asset, your circumstances, available exemptions or allowances, and the tax rules applying at the time of disposal.
This page is general educational information and is not personalised tax advice.
Three ideas make Capital Gains Tax easier to understand.
Before looking at rates or allowances, it helps to understand how the gain itself is established.
Acquisition cost
This is generally the amount you paid for the asset, together with certain allowable costs where the relevant rules permit them.
Disposal value
The amount received or treated as received when an asset is sold or otherwise disposed of can form part of the calculation.
Taxable gain
After relevant costs, exemptions, losses and allowances are considered, the amount remaining can determine whether CGT may be payable.
How a simple capital gain calculation works.
Actual CGT calculations can be more detailed, but this simplified process shows the main concepts involved.
Establish the disposal value
Start with the amount received or relevant disposal value for the asset.
Consider the acquisition cost
Compare the disposal value with the original acquisition cost and relevant allowable expenses.
Account for allowable costs
Certain costs associated with acquiring, improving or disposing of an asset may be relevant under the applicable rules.
Consider losses and allowances
Capital losses and any available annual exemption or other relevant relief can affect the taxable gain.
Apply the relevant tax rules
The applicable CGT rates and treatment can depend on your circumstances and the type of gain involved.
Capital Gains Tax can apply to different types of assets.
Not every asset is treated in the same way. The tax treatment depends on the asset and the circumstances surrounding its disposal.
Shares and investments
Gains from selling certain shares or investments can be relevant to CGT, subject to the specific rules applying to the investment.
Property
The disposal of certain properties can create a capital gain. Residential property can have specific reporting and tax considerations.
Business assets
Selling or transferring certain business assets can have capital gains implications, with specific reliefs potentially relevant in some circumstances.
Personal possessions
Some personal possessions may fall within CGT rules, while other items or transactions can be subject to specific exemptions or special treatment.
Digital assets
Certain disposals of cryptoassets can have tax consequences. The treatment depends on the nature of the activity and applicable tax rules.
Other chargeable assets
Other assets may also fall within CGT rules. Checking the specific treatment of the asset is important before making decisions.
Why allowances and exemptions matter
A capital gain does not automatically mean that you will have Capital Gains Tax to pay. Depending on the situation, an annual exempt amount, losses or specific reliefs may reduce the taxable gain.
The available rules can change between tax years, so current thresholds should always be checked before relying on a calculation.
Several factors can change the final CGT position.
Some transactions can have specific tax treatment.
Certain reliefs and special rules may apply depending on the asset and circumstances. Eligibility should always be checked against the current rules.
Main residence
Certain gains on a person's main home may qualify for specific relief, subject to the relevant conditions.
Business assets
Some qualifying business disposals may benefit from specific reliefs where the required conditions are met.
Gifts and transfers
Transfers or gifts of assets can have different tax consequences depending on the people involved and the nature of the transaction.
Capital losses
Eligible capital losses can potentially be used against certain capital gains under the applicable rules.
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Capital Gains Tax FAQs
Common questions about capital gains, taxable disposals, allowances and losses.
Understand the gain before looking at the tax.
Build a clearer understanding of Capital Gains Tax, allowances, losses and the factors that can affect a taxable gain.