Capital Gains Tax is a tax on the profit when you sell or give away something (an ‘asset’) that has increased in value.
It’s the gain you make that’s taxed, not the amount of money you receive.
You don’t normally have to pay Capital Gains Tax if you give something away to your spouse or civil partner.
You bought some shares for £2,500 and sold them later for £12,500. This means you made a gain of £10,000 (£12,500 less £2,500).
If you gave the shares to a friend when they were worth £12,500 instead of selling them, the gain would still be £10,000.
Current rate of Capital Gains Tax
The current rates are:
- 18% and 28% for individuals (the rate depends on your total taxable income
- 28% for trustees or personal representatives of someone who has died
- 10% for gains qualifying for Entrepreneurs’ Relief
The rates will be the same for the 2013 to 2014 tax year.
For gains made on or before 22 June 2010, Capital Gains Tax is charged at a rate of 18%.
When you don’t pay Capital Gains Tax
Capital Gains Tax doesn’t apply to personal belongings worth £6,000 or less.
You won’t usually have to pay it if you sell your main home, because of Private Residence Relief.
There’s also an annual tax-free allowance (the Annual Exempt Amount):
|Tax year||Rate||Who the rate applies to|
|2012 to 2013||£10,600||Individuals|
|2012 to 2013||£5,300||Most trustees|
|2013 to 2014||£10,900||Individuals|
|2013 to 2014||£5,450||Most trustees|
You don’t have to pay Capital Gains Tax if your overall gains are below the allowance for the right tax year.