How Does Capital Gains Tax Work 2022/23?

Hence, a capital gain (the profit) on an item that increases in value is the difference between what the item cost you to purchase and the amount of money that you actually receive when you dispose of it (sell the asset).

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UK Capital Gains Tax Rate Examples

You need to work out whether the gain (or gains) exceeds your tax-free CGT personal allowance for the tax year (6th April to the following 5th April). If not, then you do not have to pay any Capital Gains Tax at all.

Certain assets are classified as ‘tax free’ and would not be liable for CGT. Typical examples include many personal possessions (chattels) as long as they are sold for less than £6,000.

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What Does ‘Disposing of an Asset’ Mean for CGT?

For Capital Gains Tax purposes, the disposal of a qualifying asset would usually include selling it to an individual or a business, as well as:

• Giving assets as gifts to a spouse or a charity (including ‘transferring’ it to another person).
• Swapping the asset for something else.
• Receiving compensation for the item (e.g. an insurance payout because it got lost or destroyed).

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What Assets Do You Pay CGT On?

As a rule, the following ‘chargeable assets’ would be liable for Capital Gains Tax. The gain would need paying on the realisation of any profit when you dispose of or sell any of these asset classes:

• A broad range of personal possessions if they are worth £6,000 or more. It does not include your car (unless you use it in the business).
• Business assets if you are a self-employed sole trader or in a business partnership.
• Cryptocurrencies (another section explains how to check if you need to pay tax when you sell cryptoassets – such as Bitcoin).
• Premises and property (excluding your main home). However, your main home may be liable if (any):
  • You use part of it for business.
  • You let it out to more than one lodger.
  • The grounds (including all buildings) are less than 5,000 square meters in total (a little over an acre).
• Shares (excluding Individual Savings Accounts (ISA), Personal Equity Plans (PEP), and certain kinds of shares). Another section explains more about Capital Gains Tax when you sell shares.

Note: In some cases, you can reduce or defer the tax by claiming a relief. But, it would depend on the particular asset. Disposing of an asset jointly owned with someone else means you pay CGT on your share of the gain.

When Do You Not Have to Pay CGT?

You do not have to pay Capital Gains Tax if the amount of all your profits and other taxable income is below your Capital Gains Tax Annual Exempt Amount (see below).

As a rule, giving an asset as a gift to your spouse, civil partner, or to a charity, means it will be exempt from CGT liabilities.

Assets Exempt from Capital Gains Tax

Making a gain from certain kinds of assets will not be liable for Capital Gains Tax, such as:

• An Individual Savings Account (ISA) or a Personal Equity Plan (PEP).
• NS&I Premium Bonds and United Kingdom government gilts.
• Winnings from betting, taking part in lotteries, and playing the football pools.

Note: Betting duty got abolished in 2001. So there is no longer any tax liable by the customer in the United Kingdom. All winnings from sports bets, casino play, lotteries and other forms of gambling are completely tax free. Furthermore, you do not need to declare your winnings to HMRC.

Capital Gains Tax When Someone Dies

As a rule, if someone dies and you inherit an asset from them, the estate of the deceased person would pay the Inheritance Tax.

But, if at a later date you decide to sell or dispose of the asset, you will need to work out Capital Gains Tax. Any profits may be liable for a payment to HM Revenue and Customs.

CGT Rules on Overseas Assets

Overseas assets may be liable for Capital Gains Tax. UK residents with the permanent home ‘domiciled‘ overseas may not have to pay UK based tax on a foreign income. But, special CGT rules apply if you claim the ‘remittance basis’.

Note: You can read more about the rules on paying tax on foreign income or gains, including residency, domicile and the remittance basis from 6 April 2013, on the GOV.UK website.

What if You are Living Abroad?

If you are a non-resident for tax purposes, with some rules of exception, you may need to pay Capital Gains Tax on any profit (gain) you make on the sale of your residential property in the United Kingdom.

Note: Your other UK assets, such as company shares, are not liable for Capital Gains Tax unless you return to the United Kingdom within a five year period of the time you left. In some cases you may have to pay Capital Gains Tax on the profits while you were in non-residence expat status.

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Rules for Capital Gains Tax Allowances 2022

There are times when you need to know your Capital Gains Tax Annual Exempt Allowance. It determines the amount of tax-free profit you can realise before you need to pay CGT on the gain.

No tax is due unless profits (gains) realised exceed your personal tax-free allowance (called your Annual Exempt Amount). Capital Gains tax allowances run each tax year from the 6th of April to the following 5th of April.

The tax-free CGT personal allowance for the current tax year of 2022-23 is £12,300 for individuals – and £6,150 for Trusts (up from £6,000). Another section explains more about trusts and taxes.

Deducting Losses and Claiming Reliefs

In fact, the Capital Gains Tax annual exemption 2022/23 for ‘chargeable assets’ increased from £12,000 from the previous tax year. As a rule, you can reduce the payable Capital Gains tax bill by claiming reliefs or by deducting losses.

If you report a loss, the amount will be deducted from the gains you made in the same tax year. But, if the total taxable gain is still above the tax-free allowance, you can deduct unused losses from previous tax years.

Thus, if HMRC reduces your gain to the tax-free allowance, you can carry forward the remaining losses to a future tax year.

CGT Rules on Gifts to a Spouse or Charity

Note: The standard rules of what you pay Capital Gains Tax on apply to any gifts and assets disposed of (given or sold) to others. But, Capital Gains Tax special rules apply for gifts and assets given to a spouse, civil partner, or charity.

There are other rules where Capital Gains Tax is payable for chargeable assets.

They apply even if you give or sell or dispose of the assets to your civil partner or spouse, such as when:

• Giving an asset for their business that they sell on afterwards.
• You already separated and no longer lived together at all for that particular tax year. Different rules apply if it is only for part of the tax year.

What if they Sell the Asset Afterwards?

Capital Gains Tax may need to be payaid by your husband or wife (or a civil partner) if they dispose of the asset at a later date. After the 6th of April 1982, their profit (gain) or loss on the asset will be calculated from the value of the asset when they first owned it.

Before the 6th of April 1982, use the market value of assets as of the 31st of March 1982 for working out Capital Gains Tax.

Note: There are other rules for Capital Gains Tax that determine the calculation from when you actually owned it. As a rule, your civil partner or spouse should keep records of what you paid for the asset.

CGT and Gifts to Charities

Capital Gains Tax is not applied to any assets that you ‘give away’ to a charity. Even so, there are certain rules if you sell, rather than give away, an asset to charity such as if:

• The charity pays more for it than you paid for the asset.
• You sell the asset for less than the market value (see below).

Note: When working out Capital Gains Tax profit for charities (e.g. the realisation of a gain), use the sale price that they paid and not the actual value of the gifted asset.

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Working Out Total Taxable Gains

This section explains how to work out whether you need to pay Capital Gains Tax to HM Revenue and Customs (HMRC). It may be due after the sale or ‘disposal of’ certain personal possessions (called chattels) and business assets.

CGT is due if the amount of all your profits and other taxable income, excluding any exemptions, is higher than your personal yearly tax-free Capital Gains Tax allowance.

The tax-free allowances are also called your Annual Exempt Amount. There are three basic steps for working out your total taxable gains.

1. First, calculate the gain for each asset that you have sold (or disposed of). The tax year runs from the 6th of April to the 5th April that follows. Include any profit realised on property, on personal possessions, business assets, or investment shares.
2. Then, you should be able to determine the total amount of all profits from the assets you sold.
3. The final step is subtracting all the allowable losses to find out how much Capital Gains Tax you need to pay HMRC.

Note: You must report and pay Capital Gains Tax if your taxable profits, minus your tax allowance, is a positive value.

If Total Gains are Less than Tax-Free Allowance

As a rule, Capital Gains Tax would not be payable in cases where the net taxable gain is an amount less than your personal allowance. But, there are some exceptions to these rules. You still need to inform Her Majesty’s Revenue and Customs if (both):

• The gross amount (actual or valued monies) from the sale or disposal of ‘chargeable assets’ amounts to four (4) times that of your CGT allowance.
• You already register to send in Self Assessment tax returns.

Note: Write to HMRC if you are not registered for a Self Assessment tax return. Different rules apply when you want to report a loss (see below).

UK Property or Land as a Non-Resident

As a non-resident you do not need to pay tax on most types of Capital Gains. But, you must make a report if you sell (dispose of) your residential property. This rule also applies even if you make a loss or the gain is below your annual tax-free allowance.

Note: HMRC produces further guidance about paying Capital Gains Tax when making direct or indirect disposals of UK property or land and not resident in the United Kingdom.

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Reporting and Paying Capital Gains Tax

You can report payable Capital Gains Tax using the ‘real time’ service or your Self Assessment tax return. Non-residents must contact HM Revenue and Customs within thirty (30) days of selling a UK residential property. This applies even in circumstances where there is no taxable payment due or liable.

Note: You can read extra guidance on how to report and pay Capital Gains Tax on UK property on the GOV.UK website.

Before You Make a Report

For each Capital Gain (profit) or loss that you report, you need to include your calculations. You must also keep records about the costs and the proceeds for each asset. If you qualify for any reliefs or other exceptions, you need to include these details too.

Note: You can get further help working out Capital Gains Tax rates or submitting a tax return from a tax adviser or an accountant.

How to Report a Gain and Pay Straight Away

UK residents can use the ‘real time’ Capital Gains Tax service. If you do not already have a Government Gateway account, you can set it up from the sign-in page.

You will need to upload PDF or JPG files if you use this service. The uploaded files must show how you calculate the capital gains and the CGT amount.

When to Make the Report

You can use the ‘real time’ Capital Gains Tax service straight after calculating your gains and how much tax you owe. There is no need to wait until the end of the current tax year.

HM Revenue and Customs will send a letter or an email to you after you report a gain. The letter will give you a payment reference number and it will inform you about several ways to pay the tax.

Note: You must make a report by the 31st of December after the tax year when you made the gains. The UK tax year runs from the 6th of April to the 5th of April in the following year.

Tax Year after You Disposed of Assets

If you do not normally complete a tax return but have sold (disposed of) chargeable asset(s), you must register for Self Assessment by the 5th of October following the relevant tax year of the sale. A reminder letter gets sent out to those who have registered for Self Assessment. Contact HMRC if you do not receive a reminder letter.

After You Send Your Tax Return

HM Revenue and Customs will inform you on how much is owing for the year you have declared. You must settle your tax bill according to Self Assessment deadlines and penalties.

There are financial penalties for:

• Submitting a tax return after the 31st of January (electronically) and the 31st of October (paper form).
• Submitting an inaccurate return.
• Missing a tax bill payment deadline.

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Capital Gains Tax Rates 2022 – 2023

This section explains the Capital Gains Tax rates for gains made after the new tax rules came into full effect (e.g. from the 6th of April 2019).

You can report any amount that you need to pay using the new ‘real time’ Capital Gains Tax service – or via your annual Self Assessment tax return.

Her Majesty’s Revenue and Customs then calculate the total amount that you owe in Capital Gains Tax. They will base it on the tax rate for that particular year.

An exception to this rule applies for non-residents who sell a UK residential property. They would pay a different rate of tax on the gains.

Non-residents must inform HMRC within 30 days of the property conveyance. For example, if a conveyance takes place on the 1st of March, you must report the sale (or disposal) to HMRC before the 31st of March.

The rules on tax for gains on general assets are different to those on residential property. In most cases, there is no Capital Gains Tax when selling your main home (e.g. using Private Residence Relief).

Higher Rate Income Tax

The Capital Gains Tax rate for an additional or higher rate taxpayer from the 6th of April is:

• 28% on gains realised from residential property.
• 20% on gains made from other chargeable assets.

Basic Rate Income Tax

If you are a basic rate taxpayer, the rate you pay depends on several factors. The size of the gain, your taxable income, and whether your gain is from residential property or other assets, will have some effect.

1. You need to work out your usual taxable income (income less your Personal Tax Allowance) and any Income Tax reliefs that you may have entitlement to.
2. Calculate your total taxable gains (profits).
3. Deduct your tax-free allowance.
4. Add this to your taxable income.
5. You will pay 10% Capital Gains Tax (or 18% on residential property) if the amount is within the basic Income Tax band for 2022 to 2023 tax year. Any amount above this has a 20% (or 28% on residential property) tax liability.

Gains from Residential Property with Other Assets

You can use tax-free allowances against gains that would usually be charged at the highest rate (e.g. where you would be paying 28% tax).

CGT Rate for Trustee or Business

In cases where someone has died, their personal representative or trustees will pay the Capital Gains Tax. It will either come from the estate or the trust – at the current CGT rate of:

• 28% on residential property
• 20% on other chargeable assets

If you are in a business partnership or a sole trader with gains that qualify for Business Asset Disposal Relief you will pay 10% Capital Gains Tax.

Note: Another section explains CGT rates for gains made before the new tax rules took effect beginning the 6th of April 2016.

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Capital Gains Tax If You Make a Loss

This section explains what happens if you make a tax loss on a chargeable asset. Find out how to report Capital Gains Tax ‘allowable losses’ to HM Revenue and Customs (e.g. to reduce a gain).

How to Reduce Capital Gains Tax

To lower the total taxable gains amount payable to HMRC, you can report losses on chargeable asset(s). Thus, the loss you report is the amount that gets deducted from the gains you made in the tax returns for a given year.

What if you go above your tax-free allowance after totaling the taxable gain? In this case, you can deduct any ‘unused’ losses from previous tax years.

The current year loss, plus any remaining losses from previous years, may reduce the gains below the annual exempt amount. In this case, you can carry forward any excess losses to future tax years.

Reporting CGT Losses to HMRC

As a rule, Capital Gains Tax losses are ‘claimed’ on your tax return. Write to HM Revenue and Customs if you are not registered for Self Assessment. Thus, the same applies if this is the first time you made a profit (realise a gain).

So, what happens when you dispose of an asset at a loss? You have up to four (4) years after the end of that tax year to declare it on your Self Assessment.

Note: There is an exception to the rules for CGT losses when made before the 5th of April 1996. They are still claimable, but only after claiming all current, eligible, losses.

Loss on Disposal of Assets (family and others)

Husband, Wife, or Civil Partner

In most cases, assets that you give or sell to your spouse (or civil partner) are not liable for Capital Gains Tax (CGT). But, you cannot claim for Capital Gains Tax losses against these assets.

Family Members

Likewise, you cannot deduct CGT losses from gifts, selling, or the ‘disposal of’ assets to a family member – unless you are offsetting the loss against a gain to the same person (including ‘connected people’).

Connected People

For CGT purposes, connected people are defined by HM Revenue and Customs as a list of individuals that may include:

• Your grandparents, parents, all siblings, children and grandchildren, plus their spouses or civil partners.
• The grandparents, parents, brothers and sisters, children, grandchildren and their spouses or civil partners of your husband, wife or civil partner.
• Business partners or a company that you control.
• A trustee where you, or someone connected to you, is acting as the ‘settlor’ (e.g. in relation to trusts).

Claiming Asset Depreciation

Depreciation refers to situations where you are claiming for an asset that has lost its value. Thus, you can claim a Capital Gains tax loss if an asset, that you still own, becomes worthless or of ‘negligible value’.

HMRC has further guidance on the special rules for CGT losses, including:

• Circumstances where you are a ‘temporary non-resident‘.
• From income on shares that are ‘unquoted’ or through the Enterprise Investment Scheme.
• When someone passes away (e.g. using Self Assessment helpsheet HS282).
• On overseas assets if you are ‘non-domiciled’ in the United Kingdom and have claimed the ‘remittance basis’ (e.g. using RDR1).
• When making direct or indirect disposals of UK property or land and not being resident in the United Kingdom.

Note: Refer to HM Revenue and Customs for further information on the special rules on how to make a negligible value claim on the disposal of shares subscribed for in qualifying trading companies.

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Record Keeping for Capital Gains Tax

You must collect all Capital Gains Tax records to help you calculate your gains or losses. You also need them for filling in your Self Assessment form. You must keep CGT records for at least one (1) year after Self Assessment deadlines. Online and paper submissions have different deadlines.

HM Revenue and Customs (HMRC) can check your tax return. They will inform you if this process has already started. If so, you must keep your CGT records for longer than the usual period. The same rules for CGT record keeping apply if you sent in your Self Assessment return late.

CGT Records You Need to Keep

The kind of Capital Gains Tax records that you need to keep include invoices, bills, and receipts that have the monetary amount and date showing:

• The total amount that you paid for an asset.
• Any extra costs you paid out, such as Stamp Duty, professional advice, establishing the market value, or improvement costs.
• Any monies you received for the asset. This could be compensation for a damaged asset or for instalment payments you get at a later date.

You should also keep contracts and any documents used when selling or buying an asset. These can include asset valuations and contracts from stockbrokers or solicitors.

What Happens if You Do Not Have CGT Records?

If you cannot replace CGT records, such as if they got destroyed, stolen or lost, you must try to recreate them. That means using recreated records to complete your Self Assessment return.

In this case, you must be able to show where the figures are different between:

• Estimated figures: Meaning you want HM Revenue and Customs to accept them as final.
• Provisional figures: Meaning you will update HM Revenue and Customs with the actual figure at a later date.

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Market Value for Capital Gains Tax Purposes

As a rule, the amount that you sold an asset for – minus what you paid for it – is your profit or realized gain. Yet, there are some circumstances where you use the market value as a substitute, such as for:

• Gifts: Use the market value at the date of the gift.
• Assets sold at a lower price to help the buyer: Use the market value at the date of sale.
• Assets owned before April 1982: Use the market value at the 31st March 1982.
• Inherited assets where the Inheritance Tax value is unknown: Use the market value at the date of the death when valuing the estate of someone who’s died.

How to Check the Market Value

HMRC will be able to help you calculate the market value when you complete your tax return. You should fill in a ‘Post-transaction valuation check form CG34‘ after you have sold or disposed of an asset.

Return CG34 form to the address provided on the document and allow a minimum of three (3) months for HM Revenue and Customs to respond.

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Related Help Guides

• Capital Gains Tax for sole traders and business partnerships.
• HMRC tax when you sell a property (UK or overseas).
• How does Capital Gains Tax work on personal possessions?

Note: This short video presented by HM Revenue and Customs explains what allowable expenditure you can claim against Capital Gains Tax.

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