When you sell an asset for more than you paid for it, and when the difference is higher than the level set by your personal capital gains tax allowance, you will become eligible to pay capital gains tax on this difference. The level set for this tax-free capital gains tax allowance is currently set at £12,000 for individuals and £6,000 for trusts. In the case of a jointly-owned asset being sold, such as a second home, you only need to pay capital gains tax on your share of the difference raised, and only if this exceeds your personal capital gains allowance threshold.
If you have access to dedicated bookkeeping software for any self-employment activities or other forms of untaxed income, you should also use it to take in your capital gains tax calculation, as this will also need to be included in your annual self-assessment tax return.
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What’s eligible?
Assets that are eligible for capital gains tax if they are sold for an amount surpassing your capital gains allowance include property, shares, business assets and personal possessions, such as antiques, jewellery or vehicles. You should research market trends when considering the sale to see whether it is worth attempting to sell it, and to calculate the likely amount of capital gains tax you will need to pay if the sale successfully goes through.
Gifts and inheritances
Gifts of property, shares and personal possessions can also become eligible for capital gains tax, although different rules apply if the gift is from a spouse, civil partner or charity – check online for further details. You will also need to check your figures and tax implications carefully if you are selling the asset for less than what you paid for it in order to help out the buyer. The same applies to an inheritance – you will need to consult a tax expert to work out what, if any capital gains tax will need to be paid on your inherited assets.
Other considerations
Other special rules apply for people living abroad, if you are selling a lease or part of your land, or if your property is compulsorily purchased. You can costs related to the sale where relevant, such as solicitors and estate agents’ fees and costs of improvement works carried out for the sole purpose of enhancing the value of your property before its sale. Tax relief may also be available if the asset in question is your main home or is still being occupied by a dependent relative.
How to settle your bill?
Once you have ascertained that you do need to pay capital gains tax on your property, asset or the proceeds of its sale, you will need to declare all the details on the self-assessment tax return form for the relevant tax year. Your accountant or tax specialist can help with this. You will receive an invoice for the tax owed and are obliged to settle this directly with HMRC within the specified deadline. More details are available online at www.gov.uk.
