Personal Assets Subject to Capital Gains Tax
The ‘gain’ is classed as the positive difference between the purchase price and the selling price of an item.
Thus, you need to understand how to calculate the total amount of profit realised on personal possessions for CGT.
As a rule, Capital Gains Tax is chargeable if you ‘dispose of’ chattels for £6,000 (or more) and it produces a financial gain.
You may need to calculate the gain to determine whether tax will be due on these common personal possessions that businesses sell or give away:
- Coins (includes selling crypto assets)
- Stamps (including certain items that usually belong with a collectible set, such as books, chess pieces, china ornaments, matching vases)
Items Exempt from Capital Gains Tax
In most cases, you do not pay tax on gifts given to a spouse or charity (including a civil partner). You also don’t pay CGT on (unless used for business):
- A car.
- Possessions with a limited lifespan (e.g. an antique clock, machinery) unless used in connection with the general running of the company.
Note: Another section contains detailed information about Capital Gains Tax for business owners (e.g. company partnerships and self-employed sole traders).
CGT on Jointly Owned Personal Possessions
You might own chattels, or a personal possession, with another person(s). If so, you will be exempt from paying gains tax on the first £6,000 of your share.
Working Out the Gain
In most cases, the CGT gain will be the difference between the amount you paid for a personal possession(s) and the amount you receive after selling it (them).
But, there may be times you will need to use the market value instead, such as when you:
- Already owned the item (chattel) before April in 1982.
- Inherited it (and do not know the Inheritance Tax value).
- Received it as a gift (different rules apply when gifting to a spouse, civil partner, or charity).
- Sold it for an amount less than it was worth (e.g. to help negotiate a deal with the buyer).
Deducting Costs from the Gain
You may be able to deduct some costs from a gain when purchasing, improving, or selling a personal possession. As a rule, you can deduct costs for:
- Certain kinds of specialist fees (e.g. for valuations, advertisements).
- Improving the asset (excluding reparation fees).
- VAT (unless you meet the eligibility criteria for reclaiming VAT).
Note: You cannot deduct costs for interest on a loan used to buy personal possessions. The same rule applies to costs claimed as expenses (when used for business purposes).
Selling Personal Possessions (£6,000 to £15,000)
You may reduce the gain for an item if you receive an amount between £6,000 and £15,000 after ‘disposing of it‘ (or selling it). If so, follow these three steps:
- Subtract £6,000 from the amount you received.
- Multiply this figure by 1.667.
- Compare this calculation with the actual gain – then use the lower amount as the capital gain.
When You Need to Report and Pay CGT
If you determine a realised gain, the next step will be working out if you need to report and pay Capital Gains Tax to HM Revenue and Customs (HMRC).
How to Report CGT Losses
There is a different set of rules for reporting a loss. You can claim losses for possessions which got sold for less than £6,000.
The method of working out a loss uses £6,000 as the amount you sold your possession for. You can then report this figure in your tax return.
Personal Possessions with Limited Lifespans
There is no need to pay Capital Gains Tax on personal possessions if they have a lifespan of less than fifty (50) years. Besides machinery, it also includes items such as watches or antique clocks.
Different rules apply if you have used the possession for trading in the business. Capital Gains Tax is not due if it does not qualify for business capital allowances relief. But, you may need to pay tax if it qualifies and you cannot claim the losses.
Personal Assets that are Part of 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. Furthermore, you do not pay tax on each separate part of a set sold for less than £6,000 (providing you sell the individual pieces to different people).
Note: Sets of personal possessions can include things like books and novels written by the same author, chess pieces, and matching sets (e.g. china, glassware, vases).
Related HMRC Tax Guides
- Inheritance Tax Rates and Rules in the United Kingdom.
- How to contact HM Revenue and Customs (HMRC) about taxes?.
- Working out capital gains on disposed assets for HMRC.
Note: The Capital Gains Tax guide explains more about how taxation on the profits realised after selling an asset works in Great Britain and Northern Ireland. You can also consider seeking expert advice from a professional tax adviser or an accountant.