Our Capital Gains Tax Calculator is designed to simplify your tax calculations, allowing you to accurately calculate your CGT obligations. Understanding how CGT works and how it affects your property investments is crucial. Here, we provide a comprehensive guide to help you manage your tax responsibilities efficiently.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit when you sell an asset that has increased in value. It's the gain you make that is taxed, not the amount of money you receive. This tax applies to various assets, including property, stocks, and valuable personal possessions.
How is Capital Gains Tax calculated?
CGT is calculated based on the difference between the selling price of the asset and its original purchase price. This gain is then subject to tax after accounting for allowable expenses and exemptions. Here is a simple example to illustrate how CGT is calculated:
| Description | Amount (£) |
|---|---|
| Selling Price | 500,000 |
| Purchase Price | 300,000 |
| Gain | 200,000 |
| Allowable Expenses | 10,000 |
| Taxable Gain | 190,000 |
| Annual Exemption (2024/25) | 3,000 |
| Gain after Exemption | 187,000 |
| CGT Rate (18%/28%)* | 33,660 |
*The CGT rate varies based on your total taxable income and the nature of the asset. For residential properties, basic rate taxpayers are charged 18%, and higher rate taxpayers are charged 28%.
When is CGT owed and who pays it?
The individual or entity that sells or disposes of the asset is responsible for paying CGT. Additionally, you must report and pay any CGT on UK residential property within 30 days of completion of the sale or disposal.
Do I pay CGT when I sell my home?
You typically do not pay CGT when selling your primary residence due to Private Residence Relief. However, if you have used part of your home exclusively for business, or if the property has been let out, you may owe CGT on the portion of the gain attributable to those uses.
Can I reduce the CGT owed?
There are several ways to reduce your CGT liability:
- Private Residence Relief: Claim relief if the property was your main home.
- Annual Exemption: Utilise your annual tax-free allowance (£12,300 for 2024/25).
- Capital Losses: Offset gains with any capital losses from other assets.
Changes to CGT in 2020
Significant changes to CGT were introduced in 2020, impacting how gains on residential property are reported and taxed. Key changes include:
- 30-Day Reporting: You must report and pay any CGT on residential property within 30 days of completion.
- Lettings Relief: This relief is now restricted to periods where the owner shared occupancy with the tenant.
For detailed information on these changes, please refer to the official UK Government guidance on Capital Gains Tax.
Frequently Asked Questions
What is the annual exemption for Capital Gains Tax?
The annual exemption for Capital Gains Tax is the amount of profit you can make before paying any CGT. For the tax year 2024/25, the annual exemption is £3,000.
Can I carry forward capital losses to offset against future gains?
Yes, you can carry forward unused capital losses to offset against future gains, which can help reduce your CGT liability in future years.
Is CGT applicable on inherited property?
Inherited property is only subject to Capital Gains Tax (CGT) when you decide to sell or dispose of it. The taxable gain is calculated by comparing the selling price with the market value of the property at the time it was inherited. However, if you move into the inherited home and it becomes your main residence, you won’t have to pay CGT on it.
How do I report Capital Gains Tax?
You must report your capital gains using the Self Assessment tax return. For residential properties, you are required to report and pay any CGT within 30 days of the completion of the sale or disposal.
Are there any assets exempt from CGT?
Yes, some assets are exempt from CGT, including your primary residence (if it qualifies for Private Residence Relief), personal belongings worth less than £6,000, and certain investments like ISAs.
Our Additional Resources
To further assist you in navigating stamp duty and other financial aspects of property investment, we offer a range of tools designed to help. Our residential stamp duty calculator helps you estimate the taxes on primary residences, while the commercial stamp duty calculator is tailored for commercial property transactions. Additionally, our mortgage calculator can help you understand your potential monthly payments and borrowing limits, and our capital gains tax calculator provides insights into the taxes applicable upon selling your investment properties. These tools are designed to provide you with comprehensive support in managing your property investments effectively.
