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Understanding and complying with Capital Gains Tax (CGT) is crucial for effective financial planning and legal compliance, helping you to avoid penalties, interest charges, and financial losses.
To ensure you maximise your assets, we’ve compiled a complete capital gains tax checklist to help you approach the process of registering and paying more confidently.
Contact Mollan today for a detailed consultation with no fees or obligations.
When you sell or dispose of an asset that has increased in value, you usually pay capital gains tax. It’s crucial to conduct accurate tax calculations on such assets to avoid liabilities and maximise tax reliefs and exemptions. Effective tax planning is essential in this area.
For example, if you bought a house 20 years ago and sold it today for a profit of £100,000, you may be liable for tax on the gain, not the asset itself.
Further details on accurate calculations are provided in the guide.
Capital Gains Tax usually applies to the following assets:
Exempt assets usually include:
Special considerations for capital gains tax include:
There are two Capital Gains Tax rates:
Basic | Higher | |
General Assets | 10% | 20% |
Residential property | 18% | 24% |
Until 2024, the higher tax rate for residential property was 28%, but it has since been reduced to 24%. This is a good example of taxation adjustments that take place regularly, and it is important to be aware of them.
Note: If you have “carried interest” from an investment fund, the rate is 28%. In all cases, you can subtract a Capital Gains Tax allowance from your total tax liability.
The Capital Gains Tax allowance exempts a certain amount of profit from CGT when you sell that asset. The allowance varies by tax year, so it’s important to stay informed about changes.
Below are the current annual allowances, as updated by Gov.uk:
Tax year | Individuals, personal representatives & trustees for disabled people | Trustees |
2024/2025 | £3,000 | £1,500 |
2023/2024 | £6,000 | £3,000 |
2022/2023 | £12,300 | £6,150 |
2021/2022 | £12,300 | £6,150 |
2020/ 2021 | £12,300 | £6,150 |
2019/ 2020 | £12,000 | £6,000 |
Stay up to date with Capital Gains Tax allowance rates through Gov.uk.
When calculating your CGT liability, follow these steps. We’re using the example of selling a home and earning £100,000 of CGT:
If you incur a loss, subtract it from gains made in the same tax year. If the resulting gain exceeds the allowance, you can offset unused losses from previous years. Any remaining losses can be carried forward for future use.
There are exemptions from CGT in certain circumstances, including:
Private Residence Relief (PRR) may apply if you lived in a residential property as your main home before selling, a rule allowing homeowners to exclude a portion of their Capital Gains when selling their primary residence.
Circumstances include:
Business Asset Disposal Relief applies if you’re disposing of business assets up to a lifetime limit of £1 million, offering a 10% relief on gains is applicable.
Rollover Relief allows you to defer the Capital Gains Tax on any gains made from selling a business asset until you reinvest the proceeds in a new business asset.
Incorporation Relief allows you to defer Capital Gains Tax on gains when transforming a business into a company, as long as you receive shares in exchange.
Gift Relief allows you to delay Capital Gains Tax obligations when giving away or selling an asset below its market value. give away an asset, or sell it under its market value, you can delay the CGT obligation. Instead, the recipient may be liable for CGT instead.
Transfers of assets between spouses or civil partners are typically exempt from Capital Gains Tax.
Certain share schemes, like employee share schemes, are exempt from Capital Gains Tax obligations.
Understanding your CGT obligations and how to report gains is crucial for maximising returns on your assets while navigating regulatory requirements smoothly.
A diligent and knowledgeable approach is a good start, but the best way to ensure that no stone is unturned is to work with expert accountants, who specialise in financial matters. Including comprehensive and compliant CGT reporting.
Contact Mollan & Co today for a free, zero-obligation consultation.
I'm the owner and Managing Director of Mollan & Co Accountants. I'm a skilled and efficient accountant with more than 20 years of experience in the industry.
I developed valuable skills in commercialisation through my work in the science and technology department at the Scottish University. Then, in 2002, I formed my own internet-based marketing company, producing and distributing 360° virtual reality tours for the Scottish tourism sector.
I now use my commercial skills, expert tax knowledge and first-hand experience to help other businesses grow and flourish through strong accounting practice.
Our success at Mollan & Co is directly related to the success of our clients.