What is Capital Gains Tax and do you need to pay it?
Capital Gains Tax (CGT) is a tax on any profits you make whenever you sell (dispose of) an asset that has become more valuable since you received it.
You will have to pay a percentage of tax on the actual gain itself, not the entire amount of profit.
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Do I have to pay Capital Gains Tax?
You may have to pay CGT on the following:
- Business assets and shares
- Shares that aren’t in an ISA or PEP
- Personal possessions worth over £6,000 (not including cars)
- Property you own besides your main home
- Your main home, but only if it’s large, let out or used for business
You may still have to pay Capital Gains Tax even if these assets are a gift or transferred to someone else. Even if your asset is lost or destroyed, you may have to pay CGT on any insurance pay out you receive.
The good news is that there is a tax-free amount you can earn up to before becoming liable. If anything you sell or dispose of is under £12,000 in value, you will not be liable for Capital Gains Tax. This is known as an Annual Exempt Amount.