7 things you need to know about Capital Gains Tax
7 things you need to know about Capital Gains Tax
In 2024, capital gains tax (CGT) was up 13%, generating additional tax for the Exchequer, and now the CGT allowance has been cut over the years to only £3,000.
What catches a lot of people out is that CGT isn’t just paid on stocks and shares and investment properties, it can be paid on crypto or valuable things sold on online platforms like eBay and Facebook Marketplace for instance, and it’s not just paid when you sell, it can be due if you give things away, or use crypto to buy things.
1. The tax-free allowance has fallen in recent years
In 2022-23 you could realise a gain of £12,300 and pay no CGT, just two years later, the allowance is £3,000. It means more people face paying more of this tax, and some people are being exposed to it for the first time.
2. The rate has risen
October’s 2024 Budget hiked the rate on stocks and shares and other non-property assets from 20% to 24% for higher rate taxpayers and from 10% to 18% for basic rate taxpayers. For couples who arrange for the bulk of taxable gains to be made by a lower earner, this was a particularly painful hike.
3. You may have to pay it on things you give away
People usually associate making a capital gain with selling an asset, but if you give it away to anyone other than a spouse or civil partner, the gain it has made since you bought it will normally be assessed for capital gains tax purposes. If you give away assets with gains of over £3,000, there will usually be tax to pay.
If you give it to a spouse or civil partner, there’s no tax on the transfer, but when they come to sell it, their gain will be calculated from the date you acquired it.
4. If you sell something for less than it’s worth, you have to pay more than you think
Some people hope to get around capital gains tax by selling something for less than it’s worth – such as a second property. However, in these circumstances, capital gains tax will be due on the full market value.
5. You may pay CGT on crypto – including if you spend it
This can be easily overlooked, because initially crypto was conceived as a new way of spending money. However, because the value can change so much, you could be spending assets which have gained significantly in value, and because this is counted as disposing of them, it can trigger a tax bill. It means you need to be certain about when you acquired the assets and how much they have gained in value since then – and keep good records.
6. You may pay it on things you exchange for something else
This includes two people exchanging second properties – it doesn’t get around the CGT bill. It also includes someone swapping one type of crypto for another.
7. You may pay it on things you sell on sites like eBay
If you’re not buying and selling to make a profit, you don’t need to worry about paying income tax on your profits. However, if you sell something worth £6,000 or more and make a gain of more than £3,000, you may have to pay capital gains tax. This includes things like jewellery, paintings and antiques. It also includes sets of things – which will be valued together if they’re sold to the same person.
If you are not sure about any items you are looking to sell or just want advice, talk to your accountant here at Kennedys Accounting, who will be pleased to assist you.