Capital gains tax (CGT) is a tax on capital “gains”. If when you sell or give away an asset it has increased in value, you may be taxable on the profit. This does not apply when you sell personal belongings worth £6000 or less.
You might have to pay capital gains tax if you:
• sell, give away, exchange or dispose of an assets or part of an asset.
• receive money from an asset-for example compensation for a damaged asset.
You do not have to pay capital gains tax on:
• your car
• your main home
•personal belongings sold for less than £6000 like furniture, paintings
• bettings, pools or lottery winnings
• ISAs, VCTs.
There are a few ways of cutting your CGT bill:
•if you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT
•you can’t give assets to your children or others or sell them assets cheaply without having to consider CGT
•if you make a loss you may be able to make a claim for that loss and deduct it from other gains, but only if the asset normally attracts CGT – for example you cannot set a loss on selling your car against gains from disposing of other assets
•if someone dies and leaves their belongings to their beneficiaries, there is no CGT to pay at that time – however if an asset is later disposed of by a beneficiary, any CGT they may have to pay will be based on the difference between the market value at the time of death and the value at the time of disposal.