Contents

• Chargeable persons
• Chargeable assets
• Exempt Assets
• The Annual Exempt Amount
• Allowable Losses
• No Gain / No Loss Disposals 
• Disposals on death
• Calculating a taxable gain on the disposal of an asset
• Reporting and paying CGT 

Chargeable persons

Individuals are assessable to CGT on UK and non-UK assets, if they have been resident in the UK at any time during the tax year in which the gain arose. Residence is determined by the Statutory Residence Rules which were introduced 6 April 2013.

If an individual leaves the UK and they dispose of an asset they acquired before they left, while outside of the UK, they will not be assessable to CGT, unless they return to the UK within 5 years of leaving.

There are special rules for non-UK domiciled individuals. An individual will be assessable to CGT if they have been resident in the UK for the last seven out of the last nine tax years. The exception to this rule is if they have elected for the remittance basis of taxation.
 

Chargeable assets

CGT is paid when the chargeable gain on a chargeable asset is above the annual exempt amount. For jointly owned assets, CGT is taxed on the individual’s share of the gain. 

A chargeable asset is something that is owned and can include property, shares in companies or other possessions. Most assets will be chargeable to CGT unless they are specifically exempt (described later). Types of chargeable assets include:

• Most personal possessions worth £6,000 or more
• Property that is not the principal place of residence 
• Shares, units trusts, OEICS, Mutual funds – that are not held in a tax exempt savings such as an ISA or pension.
• Investment funds and Investment Trusts.
• Business assets such as land, buildings, fixtures and fittings.

 

Exempt Assets

Some assets and transactions are exempt from CGT. These include:

• An individual’s principal place of residence. Where a taxpayer owns more than one property, they may make an election as to which one will be treated as their main principal residence. 
• Private motor cars (including vintage cars).
• National Savings Premium Bonds.
• Chattels – tangible and moveable property sold for up to £6,000 per item.  
• Gilts and qualifying company loan stock.
• Life assurance policies, unless the person disposing of the policy is not the original beneficial owner, and they acquired the policy for money or money’s worth.
• Gifts to UK registered charities and national heritage bodies.
• Compensation payments for personal/professional wrong or injury.
• Stocks and shares held in an ISA or pension.
• Shares in Venture Capital Trusts and The Enterprise Investment Scheme (subject to certain criteria).
• Prizes and betting winnings, including the National Lottery.

 

The Annual Exempt Amount

Each tax year, most individuals who are resident in the UK are allowed to make a certain amount of capital gains before they pay CGT. This is because they are entitled an annual exempt amount of £3,000, for tax year 2024/2025. Gains up to this amount are tax free. Any unused annual exempt amount cannot be carried forward or back to another tax year.

Spouses/civil partners are treated separately for tax purposes and are both entitled to their own annual exempt amount. 

Trustees have an annual exempt allowance, currently £1,500 (tax year 2024/2025) and is half of the individual allowance. This is split between the number of trusts the settlor created during their lifetime up to a maximum of 5 trusts (£300 each).
 

Allowable Losses

Individuals may make a capital loss rather than a capital gain where the value of the asset at the time of disposal is less than when it was acquired. Allowable losses are used to reduce taxable gains in the same tax year, even if this means reducing the gain to below the annual exempt amount.

If the losses are not fully used, any excess can be carried forward to be offset against the gains of later years.

Claims for losses are included on an individual’s tax return. They do not need to be reported straight away – claims can be made up to four years after the end of the tax year that the asset was disposed of. 

 

No Gain / No Loss Disposals

Certain disposals are known as no gain/no loss disposals, such as gifts between spouses/civil partners, where the transfer of the chargeable asset does not give rise to either a gain or a loss. The recipient of the gift will be treated as having acquired the asset at the original acquisition cost of the transferor.

Before 6 April 2023 spouses and civil partners who were separating had until the end of the tax year of separation to use the no gain/no loss basis. After which transfers were treated as taking place at market value. 

From 6 April 2023 the rules changed. Spouses and civil partners who are in the process of separating have up to three years after the year they cease to live together to make transfers on a no gain no loss basis, and an unlimited time when the assets are the subject of a formal divorce agreement. In addition, an individual who transfers the former marital home to their ex-partner and retains an entitlement to part of the proceeds on a later sale, will be able to apply the same tax treatment to the proceeds that would have applied at the date of the transfer. They will also have the option to claim Private Residence Relief. 
 

 

Disposals on Death

There is no CGT on gains arising on an individual’s death since the asset will form part of the deceased’s estate and will be potentially subject to Inheritance Tax. If the deceased suffers any losses in the year of death, these may be carried back and offset against any chargeable gains that had been assessed in the three previous tax years and, if applicable, tax already paid will be refunded to their estate.

The personal representatives of the deceased are treated as receiving the assets at their market value at the time of death; this is known as the probate value. If they subsequently sell the assets which have risen in value since the date of death, as opposed to distributing the assets to the beneficiaries of the deceased’s Will, they will be charged CGT (after allowing for the full annual exemption) at a rate of 20% or 24%, if the asset is residential property.

During the year of death and in each of the following two tax years, the personal representatives are entitled to the full annual CGT exemption.
 

Calculating a taxable gain on the disposal of an asset

To calculate the taxable gain, deduct the following from the disposal proceeds or market value:

• original (acquisition) cost or market value
• costs of sale 
• cost of purchase 
• Annual Exempt Amount

Before carrying out the calculation it is important to consider the following:

1. The base value used in any CGT calculation is taken as the original acquisition cost of the asset, unless it was acquired before 31 March 1982, when the base cost will generally be the market value on that date. 
2. Costs of improvement to an asset can be deducted in the calculation to reduce the gain. Improvements can include, for example, an extension to a house, but not repairs. Similarly, the incidental costs of buying and selling an asset can be deducted in the calculation. Typical costs include legal expenses and estate agent fees for property, and broker's commission on the purchase and sale of shares. 

For example - disposal of an asset 

John purchased a buy-to-let property in 1991 for £80,000, his purchase costs were £3,000. He sold the property in July 2024 for £150,000, he incurred sale costs of £1,500.

Disposal proceeds		£150,000
Acquisition cost	(£80,000)
Sale costs	(£1,500)
Purchase costs	(£3,000)
Total costs		(£84,500)
Gain		£65,500
Annual Exempt Amount		(£3,000)
Taxable gain		£62,500

The rate of CGT that John pays depends on his Income Tax band into which the gain falls when it is added to his taxable income. 

Reporting and paying CGT

CGT due on the disposal of UK residential property must be reported and paid within 60 days of the completion date.  

All other gains must be reported and paid on or before 31 January following the end of the tax year in which the gain was made. For example, if a gain was made on 5 October 2024, this falls in the tax year 2024-2025. The CGT bill is payable on or before 31 January 2026.