If you run a business and hold assets in the UK, understanding Capital Gains Tax (CGT) is essential for effective tax planning. Your CGT obligation can vary depending on the type of asset, your country of residence and the method of disposal. To help you navigate these complexities, this post provides a clear overview of CGT—who is required to pay it, when it applies and when tax relief is available.
Capital Gains Tax
CGT is a tax on the profit made when you sell, give away, exchange, or otherwise dispose of an asset. In this context, an “asset” refers to a wide range of capital items, including property, business shares, stocks and even cryptocurrencies.
CGT Obligations
All UK residents are liable to pay CGT on any profits made from the disposal of assets held within the UK. Even if assets are located overseas, UK residents may still be required to pay CGT to HMRC. However, your tax obligations vary depending on the timing of the disposal and personal circumstances, especially following changes introduced in the 2024 Autumn Budget. If you hold assets overseas, we recommend consulting a qualified tax professional to assess your CGT obligations.
CGT for Non-UK Residents
Non-UK residents are generally exempt from UK CGT on the sale of UK assets. However, being temporarily outside the UK or disposing of UK assets while living abroad does not automatically exempt you from CGT.
As with UK residents, CGT obligations may change according to your residency status and personal circumstances. For this reason, non-UK residents should consult a qualified accountant both in your country of residence and in the UK to determine your tax obligations.
Gifts and Other Forms of Disposal
You may be liable to pay CGT even when giving away or gifting an asset. In the case of gifts, CGT obligations depend on who receives the asset. In addition, the regulations for disposing of business assets differ from those for personal or general asset.
Inherited Assets
If you inherit assets from a deceased person or later sell or exchange inherited property, you are subject to CGT, depending on the situation. For CGT purposes, the acquisition value is generally based on the market value of the asset at the date of death.
CGT Exemptions
The following items are exempt from CGT:
- Private vehicles (including classic and vintage cars)
- Gifts to UK-registered charities
- Certain government securities
- Prises and betting winnings
- Cash
- Stocks and shares held in an ISA
- Foreign currency held for your use
- Sales that are taxed as trading or miscellaneous income
*The sale of the asset valued under £6,000 is typically not subject to CGT.
Calculating CGT
To calculate your CGT, you must first determine your chargeable gain, which is the net profit made from disposing of an asset. It is calculated as follows:
Chargeable Gain = Sale Proceeds – (Purchase Price of the Asset Value + Legal Expenses on Purchase and Sale + Extension Cost)
*Legal expenses on purchase and sale typically include agent commissions and other incidental legal costs.
*The extension cost refers to significant improvements to the asset, such as building an extension on a property.
Example:
If you bought a house in 2020 and sold it in 2025, your taxable gain would be calculated as:
Sale Proceeds (2025) – [Purchase Price (2020) + Estate Agent Fees + Legal Fees + Bathroom Extension Cost] = Taxable Gain
CGT Rates
Following the UK Autumn Budget announcement on 30 October 2024, CGT rates have increased:
- Basic Rate: Increased from 10% to 18%
- Higher Rate: Increased from 20% to 24%
For more detailed and up-to-date information, please visit the official HMRC page.
Calculating CGT involves more than simply applying a tax rate. You must carefully consider how the asset was acquired, the date of acquisition and the amount of taxable gain. In addition to these factors, various conditions, reliefs and exceptions can influence your CGT calculation.
Due to this complexity, managing CGT and planning your assets without professional guidance can be challenging, so we strongly recommend consulting a qualified accounting firm to ensure accurate calculations and effective tax planning.
