The UK Rules
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Chattels and Capital Gains Tax

How to work out the profit and how much Capital Gains Tax (CGT) you may need to pay on certain chattels when you dispose of them or sell them.

CAPITAL GAINS TAX ON PERSONAL POSSESSIONS: When you calculate the total amount of gain in Capital Gains Tax on personal possessions the amount is basically the difference between the purchase price and the selling price of the item.

Personal Possessions affected by Capital Gains

As a rule, Capital Gains Tax is chargeable if you sell or dispose of certain personal possessions, also called chattels, for £6,000 or more and it produces a gain (financial profit).

The exception could be in circumstances when you can claim capital allowances.

You might need to work out your gain to determine whether Capital Gains Tax is due on these common chattels or personal possessions;

Capital Gains Chattels Exemption

Generally, tax does not have to be paid on gifts to your spouse, civil partner, or a charity. Individuals do not pay Capital Gains Tax on;

Jointly Owned Chattels (possessions)

If you own a chattels or possession with other people you will be exempt from paying gains tax on the first £6,000 of your share.

How to Work out the Gain

Even though the gain is most often the subtracted difference between what you paid for personal possessions and the amount you sold them for, there are times you need to use the market value instead, such as when;

Cost Deductions from the Gain

You may be entitled to deduct certain costs from the gain when you are purchasing, improving, or selling your personal possession. Contact HM Revenue and Customs (HMRC) any time you are unsure whether you can deduct a certain cost. Cost deductions include;

Note: Costs cannot be deducted for interest on a loan to buy your possession or costs you can claim as expenses (if you have used your possession for business purposes).

Selling Possessions between £6,000 and £15,000

You may be able to reduce your gain if you got between £6,000 and £15,000 for your possession when you sold or disposed of it.

  1. Subtract £6,000 from the amount you’ve received.
  2. Multiply this by 1.667.
  3. Compare this with the actual gain - use the lower amount as your capital gain.

Working Out if you need to Pay

After you have determined the gain you can then work out if you need to report and pay Capital Gains Tax.

Note: You might reduce or delay the tax you pay if you have used your possession for business and you are eligible for tax relief.

How to Report a Loss

There is a different set of rules for reporting a loss because you can claim losses for possessions which were sold for less than £6,000. The method of working out a loss uses £6,000 as the amount you sold your possession for. This figure can then be reported in your tax return.

Possessions with a Short or Limited Lifespan

There is no need to pay Capital Gains Tax on your personal possessions if they have a lifespan of less than 50 years. As well as covering machinery it also includes items such as watches or antique clocks.

There are different rules if you have used the possession for trading in your business. Capital Gains Tax is not due if it does not qualify for capital allowances but you may need to pay tax if it qualifies and you cannot claim the losses.

Possessions which belong to a Set

You will not be liable for Capital Gains Tax if you sell part of a set, or a complete set, to the same person for less than £6,000. You will not pay tax on each separate part of a set sold for less than £6,000 providing you sell the parts of a set to different people.

Note: Sets of personal possessions can include things like books which have been written by the same author, chessmen, and matching sets such as china, glassware, or vases.

Capital Gains Tax on Personal Possessions; UK Rules Updated 2017