6 April 2023

Capital Gains Tax rates

You pay a different rate of tax on gains from residential property than you do on other assets.

You do not usually pay tax when you sell your home.

If you pay higher rate Income Tax

If you’re a higher or additional rate taxpayer you’ll pay:

• 28% on your gains from residential property
• 20% on your gains from other chargeable assets

If you pay basic rate Income Tax

If you’re 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.

1. Work out how much taxable income you have – this is your income minus your Personal Allowance and any other Income Tax reliefs you’re entitled to.
2. Work out your total taxable gains.
3. Deduct your tax-free allowance from your total taxable gains.
4. Add this amount to your taxable income.
5. If this amount is within the basic Income Tax band you’ll pay 10% on your gains (or 18% on residential property). You’ll pay 20% (or 28% on residential property) on any amount above the basic tax rate.

Example

Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £20,000 and your taxable gains are £12,600. Your gains are not from residential property.

First, deduct the Capital Gains tax-free allowance from your taxable gain. For the 2023 to 2024 tax year the allowance is £6,000, which leaves £6,600 to pay tax on.

Add this to your taxable income. Because the combined amount of £26,600 is less than £37,700 (the basic rate band for the 2023 to 2024 tax year), you pay Capital Gains Tax at 10%.

This means you’ll pay £660 in Capital Gains Tax.

You can see the tax-free allowances for previous years.

If you have gains from both residential property and other assets

You can use your tax-free allowance against the gains that would be charged at the highest rates (for example where you would pay 28% tax).

If you’re a trustee or business

Trustees or personal representatives of someone who’s died pay:

• 28% on residential property
• 20% on other chargeable assets

You’ll pay 10% if you’re a sole trader or partnership and your gains qualify for Business Asset Disposal Relief.

If you make a loss

You can report losses on a chargeable asset to HM Revenue and Customs (HMRC) to reduce your total taxable gains.

Losses used in this way are called ‘allowable losses’.

Using losses to reduce your gain

When you report a loss, the amount is deducted from the gains you made in the same tax year.

If your total taxable gain is still above the tax-free allowance, you can deduct unused losses from previous tax years. If they reduce your gain to the tax-free allowance, you can carry forward the remaining losses to a future tax year.

Reporting losses

Claim for your loss by including it on your tax return. If you’ve never made a gain and are not registered for Self Assessment, you can write to HMRC instead.

You do not have to report losses straight away – you can claim up to 4 years after the end of the tax year that you disposed of the asset.

There’s an exception for losses made before 5 April 1996, which you can still claim for. You must deduct these after any more recent losses.

Losses when disposing of assets to family and others

Your husband, wife or civil partner

You usually do not pay Capital Gains Tax on assets you give or sell to your spouse or civil partner. You cannot claim losses against these assets.

Other family members and ‘connected people’

You cannot deduct a loss from giving, selling or disposing of an asset to a family member unless you’re offsetting a gain from the same person.

This also applies to ‘connected people’ like business partners.

Connected people

HMRC defines connected people as including:

• your brothers, sisters, parents, grandparents, children and grandchildren, and their husbands, wives or civil partners
• the brothers, sisters, parents, grandparents, children and grandchildren of your husband, wife or civil partner – and their husbands, wives or civil partners
• business partners
• a company you control
• trustees where you’re the ‘settlor’ (or someone connected to you is)

Claiming for an asset that’s lost its value

You can claim losses on assets that you still own if they become worthless or of ‘negligible value’.

HMRC has guidance on how to make a negligible value claim.

Special rules

HMRC has guidance on the special rules for losses:

• when someone dies
• if you’re non-resident and sell UK property or land
• if you’ve temporarily lived abroad as a ‘non-resident’
• from your income on shares that are unquoted or in the Enterprise Investment Scheme
• on overseas assets if you’re ‘non-domiciled’ in the UK and have claimed the ‘remittance basis’

Record keeping

You need to collect records to work out your gains and fill in your tax return. You must keep them for at least a year after the Self Assessment deadline.

You’ll need to keep records for longer if you sent your tax return late or HM Revenue and Customs (HMRC) have started a check into your return.

Businesses must keep records for 5 years after the deadline.

Records you’ll need

Keep receipts, bills and invoices that show the date and the amount:

• you paid for an asset
• of any additional costs like fees for professional advice, Stamp Duty, improvement costs, or to establish the market value
• you received for the asset – including things like payments you get later in instalments, or compensation if the asset was damaged

Also keep any contracts for buying and selling the asset (for example from solicitors or stockbrokers) and copies of any valuations.

If you do not have records

You must try to recreate your records if you cannot replace them after they’ve been lost, stolen or destroyed.

If you fill in your tax return using recreated records, you’ll need to show where figures are:

• estimated – that you want HMRC to accept as final
• provisional – that you’ll update later with the actual figures

Market value

Your gain is usually the difference between what you paid for your asset and what you sold it for.

There are some situations where you use the market value instead.

Checking the market value

HM Revenue and Customs (HMRC) can check your valuation.

After you’ve disposed of the asset, complete a ‘Post-transaction valuation check’ form. Return it to the address on the form – allow at least 3 months for HMRC’s response.