Capital Gains Tax Calculator
What is Capital Gains Tax (CGT)?
Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that has increased in value.
It’s the gain you make that’s taxed, not the amount of money you receive.
For example, if you bought a painting for £5,000 and sold it later for £25,000, you’ve made a gain of £20,000 (£25,000 minus £5,000). It is this gain that is subject to CGT.
Some assets are tax free. You also do not have to pay GCT if all your gains in a year are under your tax-free allowance.
Click here: Capital Gains Tax Calculator
What assets are captured by CGT?
CGT is payable on the disposal of a wide range of assets. This includes the following which are some of the most common:
- Shares
- Property
- Jewellery
- Paintings
- Cryptocurrency
- Cars
Note that CGT is applicable when realising a gain on the disposal of an asset. The definition of a disposal is wider than just selling the asset. It includes the following;
- selling it
- giving it away as a gift, or transferring it to someone else
- swapping it for something else
- getting compensation for it - like an insurance payout if it’s been lost or destroyed
How is CGT calculated?
The amount of CGT you owe depends on two factors;
- How much you earn in total
- What type of assets you are selling
The important thing to remember is that there are two rates of capital gains tax - a higher rate and a lower rate – the applicable rate to you depends on the level of your earnings.
There are generally two applicable rates of capital gains tax – 10% or 20%. This is the case for shares, cyptocurrency and most other assets.
The lower rate of 10% would be applicable to you if your earnings are within the basic band rate, so below £50,270.
The higher rate of 20% would be appliable to you if your earnings were in the higher band rate, so above £50,270.
For example, if your capital gains from shares was £20,000 and your total annual earnings were £75,000:
Capital gains tax (CGT) breakdown;
- You pay no CGT on the first £6,000 that you make (the tax-free allowance)
- You pay £2,800 at 20% tax rate on the remaining £14,000 of your capital gains
Your profit after tax is therefore £17,200.
Residential Property – specific rules apply
If are selling your main home, you don’t owe CGT.
However, if you’re selling a second home CGT is payable.
For most assets, the capital gains tax rates are either 20% and 10% depending on your earnings. However, the capital gains tax rates for residential property is different. It is higher at 28% and 18% respectively.
Note; If you sell a residential property, you now need to declare your profits within 60 days and pay any tax you owe. It’s via a digital service called the Real Time Capital Gains Tax Service. If you don’t do this, you could face a fine from HMRC.
Be aware that this includes both UK residents and those who own UK property but live abroad.
When do I owe CGT?
After selling an asset, you only owe CGT on profits above the tax-free threshold which is £6,000. Anything less than that is tax-free.
When you earn more than £12,300 during a tax year, this is taxable income which you will need to declare to HMRC and file a tax return. Make sure you do this by the 31st January following the tax year in which you profited.
Of note, the rules are again different is selling a residential property. In this instance, you have 60 days to notify HMRC and pay the GCT that is payable.