If you dispose of any assets that have increased in value over time, you will most likely incur a capital gains tax liability.
How much CGT do you pay?
This depends on your income tax band.
First, the first £3,000 of gains are tax-free (for the 2024/25 tax year). This allowance has been reduced drastically over the past few years.
You are taxed at 10% on most chargeable gains within the lower-rate tax band. You pay 18% on gains from residential property and carried interest.
For gains that fall into the higher-rate tax band, you pay 20% on most chargeable gains, 24% on residential property, and 28% on carried interest.
If you make a loss on the sale of a qualifying asset, you can deduct this loss from any gains you make during the tax year or carry the loss to future years.
What don’t you have to pay CGT on?
No tax is usually paid on assets transferred to your spouse or civil partner.
If you sell your main home, you shouldn’t have to pay CGT on the gains (although you do on any other properties you may own). This is known as Private Residence Relief.
You won’t have a CGT liability if you sell any personal effects up to the value of £6,000.
Business Asset Disposal Relief
If you are disposing of qualifying business assets, you may be able to claim BADR (formerly known as Entrepreneurs’ Relief) on any gains you make and pay just 10% tax.
From 11 March 2020 onwards, the lifetime limit of claims under entrepreneurs’ relief was reduced from £10m to £1m.
Calculate your capital gains tax liability
You pay any CGT you owe via the annual self-assessment process by including details of your disposals on your tax return.
To calculate your tax bill, you first need to determine your income from normal employment during the tax year in question, referring to the current income tax bands (see here).
You then work out your CGT liability by subtracting any losses from your gains and subtracting the current CGT tax-free allowance (a miserly £3,000 for 2024/25).
If, after using up your personal allowance, and adding your total income for the year, you haven’t reached the higher rate income tax threshold, then you’ll pay 10% CGT on most chargeable gains made within the basic rate band, and 20% after that.
Further Information
If you have any questions about CGT, we recommend you talk to your accountant.
