I’m thinking of giving an asset away. What is capital gains tax and will I have to pay it?
Capital Gains Tax (‘CGT’) is a tax paid by individuals, personal representatives and trustees on the profit made on the disposal of an asset that has increased in value.
If you sell an asset or, give it away as a gift or, transfer it to someone else then this is classed as a disposal and can trigger a charge to CGT.
CGT is payable when you sell (or ‘dispose of’):
- most personal possessions worth £6,000 or more (apart from your car)
- property that isn’t your main home (provided you haven’t let it out or used it for business purposes)
- shares that aren’t in an ISA or PEP
- business assets
CGT is not payable on any gains you make from:
- ISAs or PEPs
- UK government gilts and Premium Bonds
- betting, lottery or pools winnings
Annual tax free allowance
You only have to pay CGT on your overall gains above your tax-free allowance (called the Annual Exempt Amount).
The current Annual Exempt Amount for the 2017-2018 tax year is:
- £11,300 for individuals; and
- £5,650 for trusts
If your total gains are less than the Annual Exempt Amount then you don’t have to pay tax.
What about assets which are given to spouses or civil partners or, are given to charity?
A transfer of assets between spouses or civil partners are exempt from CGT. A transfer of assets to charities are also exempt.
What happens when someone dies?
There is no CGT to pay on an asset carrying gain at the time of death. The base cost (the acquisition cost) is given a tax free uplift to the date of death value. Inheritance Tax is usually paid instead of CGT. However, if a beneficiary or personal representative sells an asset after someone has died, they will need to work out if there is any gain from the date of death vale up to the date of disposal.
This is a brief note outlining the main aspects of CGT and is intended for guidance only. If you require further advice then please speak to someone in the Wills, Trusts and Probate department.